Blockbuster Inc. to Close Up to 960 Stores to Cut Costs


Blockbuster Inc. will close up to 960 stores by the end of next year as the company looks to focus on its core stores and eliminate costs.

Liquidity has been a key issue for Blockbuster, which earlier this year faced some doubts about its ability to continue operating. The company, which has been struggling with the recession and the consumer shift to online rivals like Netflix Inc. and kiosk operators such as Coinstar Inc.’s Redbox, has refinanced debt and sold off some assets.

Blockbuster said Tuesday in a filing with the Securities and Exchange Commission that it will implement a proposed credit agreement amendment to extend the final maturity of a term loan and allow it to sell off non-core international assets and complete planned store closures.

The company said it plans to close 810 to 960 stores by the end of next year, including 280 to 300 normal closures and 300 to 385 accelerated closures this year. It added that 35% of its stores are considered core, while 47% are profitable non-core stores and 18% are unprofitable.

The company expects to avert $30 million a year in losses, though it said it will likely incur $60 million in lease-termination costs from the accelerated store closings it has planned.

Store closures are smart, Needham & Co. analyst Charles Wolf said. If the company as a whole is operating at break-even or slightly above, that implies a “material percentage” of stores are losing money, he said. Closing those stores should improve profitability, and although it will likely hurt sales, “the game here is to become profitable, and if they do it on a lower revenue base, so be it,” he added.

Mr. Wolf said Blockbuster has had to manage its business for survival, rather than growth, and has cut inventories of new releases and taken other steps, which hurt results in its most recent quarter.

Blockbuster said it expects to have a smaller overall store base and fewer large stores, with more smaller urban locations.

Write to Kerry Grace Benn at
SEPTEMBER 15, 2009, 2:34 P.M. ET

Source: The Wall Street Journal

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