Blockbuster beats view, assures on Circuit City bid

By Sue Zeidler

LOS ANGELES (Reuters) - Turnaround efforts helped Blockbuster Inc (BBI.N: Quote, Profile, Research, Stock Buzz) post better-than-expected quarterly profit on Thursday as its chief executive assured investors its controversial bid to buy Circuit City would not distract it from its continued rebound.

Results at the largest U.S. movie rental chain were boosted by cost-cutting measures, including store closures and reduced advertising and overhead expenses.

Blockbuster, which has drawn skepticism from analysts for offering to buy Circuit City Stores Inc (CC.N: Quote, Profile, Research, Stock Buzz) for up to $1.3 billion, said sales at domestic stores open at least a year improved for the first time in five years due to a better line-up of new movies, improved in-store merchandising and more effective pricing.

Net profit was $45.4 million, or 20 cents per share, for its fiscal first quarter ended April 6, compared with a year-earlier loss of $49 million or 27 cents per share.

Adjusted earnings from continuing operations were 21 cents in the quarter, beating the average Wall Street target of 16 cents, according to Reuters Estimates.

Revenue missed forecasts, falling 5.4 percent to $1.39 billion as Blockbuster closed stores, below the average analyst target of $1.44 billion, according to Reuters Estimates.

But Blockbuster cut selling, general and administrative expenses by $100.5 million on lower advertising and overhead. And domestic same-store sales rose 2.9 percent, driven by a 19.7 percent increase in merchandise sales and a 0.4 increase in rental revenue.

"This was the kind of report that investors had been hoping for but the key question is sustainability. Are these kind of same store-sale comps sustainable?" said Stern Agee analyst Arvind Bhatia.