A Securities and Exchange Commission filing has revealed Blockbuster's plans to close up to 960 retail store locations by the end of 2010 as it attempts to makes its operation more financially stable.
According to the company's filing, it plans to close all unprofitable stores, while refocusing its efforts "to improve four-wall profitability." To do so, the company first analyzed its over 7,000 stores to determine if they were profitable or not. A whopping 18 percent of Blockbuster's stores are unprofitable. The remaining stores are profitable.
Prior to making the decision to close some of its unprofitable locations, Blockbuster planned to close 280 to 300 stores as part of a grouping it calls, "normal closures." Stores added to the "accelerated closures" category will also be closed by the end of this year. According to Blockbuster, the number of accelerated closures will equal 300 to 385 locations.
Next year will be a slightly less active year for store closures. Blockbuster indicated in its SEC filing that 2010 will bring 100 to 125 normal closures and 130 to 150 accelerated closures. By the end of 2010, it expects to have closed 810 to 960 retail locations.
As troubling as that might sound, Blockbuster spokesperson Randy Hargrove said in a phone conversation that a certain amount of measured skepticism should be exercised. According to Hargrove, these figures are not guaranteed.
"All these stores are candidate stores," Hargrove said. "Although we may in fact close that many stores, if we can renegotiate leases or remodel stores to make them more profitable, that number might go down."
But Blockbuster's closure story doesn't quite end there. Further down in the filing, Blockbuster indicated that 275 to 300 stores are subject to the company's "lease mitigation/termination efforts." Another 250 to 300 stores might be converted into outlets. If successful, that would bring Blockbuster's grand total of rental store closures to 1,335 to 1,560, or up to about 22 percent of all the stores currently in operation.
Of course, there's a financial side to Blockbuster closing so many stores. The company claims that if it's successful in closing up to 960 locations, it can increase its earnings before interest, taxes, depreciation, and amortization (EBITDA) by $50 million to $60 million.
Although Blockbuster plans to close several stores, the company's kiosk business is expected to grow.
In a separate filing with the SEC, Blockbuster reported that it currently has 497 kiosk units available to consumers in the U.S. It plans to have 2,500 units available by the end of 2009. By mid-2010, it hopes to have 10,000 kiosks available to compete with Redbox.
Hargrove believes kiosks will help his company turn a corner. He pointed out that even though some stores will close, the company's kiosks "will increase the points of distribution, thus getting our product in front of more people. This whole plan is part of a multiplatform strategy to get those additional points of distribution," he said.
Although that might be a silver lining for Blockbuster, closing about 1,000 stores can't be good for business. And considering the company's stock price is hovering at about $1.40, while Netflix's price is over $44 per share as of this writing, it might only spell more troubles for Blockbuster's market appeal.
Unfortunately for Blockbuster, the bad news just keeps on coming.
Updated at 4:14 p.m. PDT to include Blockbuster spokesperson Randy Hargrove's statements.