Blockbuster posts higher profit, shares rise

NEW YORK (Reuters) - Blockbuster Inc (BBI.N), the No. 1 U.S. movie rental chain, posted a better-than-expected quarterly profit on Thursday and said its restructuring moves would yield a full-year profit in 2008.

Blockbuster shares rose nearly 10 percent in early trading to $3.34 from a close at $3.04 on the New York Stock Exchange on Wednesday.

Blockbuster reported a fourth-quarter profit of $38.1 million, or 18 cents per share, compared with a year-earlier profit of $8.3 million, or 4 cents per share.

Excluding severance cost and other one-time items, profit totaled $54.9 million, or 26 cents per share, outpacing analysts' average forecast of 19 cents per share, according to Reuters Estimates.

Revenue rose 3.6 percent to $1.57 billion, driven by double-digit increases in merchandise sales and growth in rentals by mail.

In the third quarter Blockbuster began implementing a plan to reduce annual costs by $45 million through job cuts and efforts to streamline stores and online services.

"Through aggressive cost reductions, the repositioning of our subscription programs and a renewed focus on store merchandising, we gained momentum in both sales and earnings," Blockbuster Chief Executive Jim Keyes said in a statement. "We are well positioned to return the company to profitability in 2008."

Blockbuster forecast 2008 operating income of $113 million to $133 million and net income of $5 million to $25 million. For 2007, the company reported a loss of $85.1 million.

It estimated 2008 capital expenditures of about $130 million.

Blockbuster also said it would restate results for 2006 and 2005 to correct errors in accounting for expense accruals and foreign currency adjustments, but is not withdrawing reliance on those financial statements.

(Reporting by Michele Gershberg; additional reporting by Sue Zeidler in Los Angeles; editing by John Wallace)