March 5, 2009 / 3:23 PM / 11 years ago

Blockbuster same-store sales rise, shares jump

NEW YORK (Reuters) - Top U.S. movie rental chain Blockbuster Inc BBI.N said sales at stores open at least a year rose 4.4 percent in the fourth quarter as strong demand for electronics and video games overshadowed a slump in rentals.

Blockbuster shares, which tumbled 76 percent earlier this week amid talk the company might be headed for bankruptcy, jumped 23 percent following the same-store sales news and a company statement that 2008 earnings before interest, taxes, depreciation and amortization were better than expected.

Blockbuster has said it has no plans to file for bankruptcy. But the company, which has tried to reposition itself to compete in a world where audiences are downloading videos or receiving them by mail, did enlist lawyers to help it raise capital and refinance debt.

Janey Montgomery Scott analyst Anthony Wible said the same-store sales numbers were “positive” and “well ahead of broad retail same-stores sales in the U.S. economy.”

“The company’s fundamentals continue to look good in a tough economy and we believe this may help with the bank refinancing discussions,” Wible wrote in a note to clients. He reaffirmed a “buy” rating on the company’s shares.

In a preliminary report, Blockbuster said fourth-quarter domestic same-store sales increased 4.4 percent. Sales of items such as games and consumer electronics jumped 36.5 percent, while rental revenue fell 2.6 percent.

The company said it exceeded its forecast for 2008 EBITDA — a key measure of financial health — of $300 million to $315 million, but gave no details.

A more detailed report on fourth-quarter and full-year results will be provided on March 19, the company said.

Chief Executive Jim Keyes said Blockbuster is working to resolve its August 2009 debt maturities, cut costs and “maximize the company’s strong cash flow generation.”

It has hired Kirkland & Ellis LLP to assist with capital-raising plans, including restructuring $328 million in debt, comprising a term loan and a revolving credit facility due in August.

Wedbush Morgan analyst Michael Pachter, who has a “strong buy” rating on Blockbuster, said its “valuation is compelling.”

“Though its stock price implies an imminent risk of bankruptcy, we do not believe that the company is contemplating such a drastic move,” Pachter said in a note to clients.

Blockbuster, which spent heavily and piled up debt to build an online DVD rental service to compete with Netflix Inc (NFLX.O), had to restructure its credit agreements four times starting in 2005 under former Chairman and Chief Executive John Antioco.

Shares of Blockbuster, whose blue and yellow ticket-stub logo graces some 7,000 outlets across the country, climbed 8.5 percent to 51 cents in midday trade on the New York Stock Exchange.

Reporting by Franklin Paul and Gina Keating; Editing by Derek Caney and John Wallace

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