bbi_logo.jpgHundreds of employees at movie and video game rental enterprise, Blockbuster Inc. (NYSE: BBI, BBI message board), are poised to come face to face with the dreaded job cuts as the company revealed in Tuesday’s regulatory filing that it plans to close down about 960 marginal stores by end of 2010. Justifying the doubling-up of targeted closures from the prior range of between 410 and 450, the company cited a cocktail of detrimental factors, including its lackluster balance sheet and increasing competition from rivals that use more convenient rental systems.

  Going forward, Blockbuster is also looking at converting up to 300stores to outlets, bringing the total of inconvenienced shops to at least 1,335.
In as much as this could reorganize the company to live within its means, this may also put it in a better standing to ward off the challenges of its perennial competitors such as Redbox and Netflix, Inc. (NASDAQ: NFLX) which have since migrated to mail-order and online rental systems at cheaper prices.

  According to Blockbuster, while it is likely to accrue termination costs of nearly $60 million, the forthcoming series of closures and transformations should rake in $26 million in one-time benefit towards working capital. Besides, losses of about $30 million at these stores that face closure is bound to be avoided, and more or less than $20 million of current revenues from those loss-making businesses will be channeled to turn the corners of remaining operations, the company said.

  Out of a total of 4,356 operations of Blockbuster in the U.S, 18 percent of them are reported to be running at a loss. Recently it announced a 17.8 percent decline in domestic same-store sales for the second quarter. Total revenues decreased to $1.03 billion, from $1.3 billion in the tallying period of the year before, alongside a net loss of $39.7 million ($0.21 per share). However, for the three months to July 5, net loss shows a moderate improvement from $44.7 ($0.23 per share) that was lost in the same quarter of 2008.

  At the time of writing, BBI shares were still holding their own, unmoved from Monday’s closing price of $1.40, its peak value since February. The stock has been in an uncompromising tone since September 3, when it moved up 32 percent inclining to the company’s announcement that it had managed to trim back potential debt to parent company, Viacom Inc. (NYSE: VIA).

  Reference:

http://www.blockbuster.com/corporate