Thank you, Justice, Oil, Criminal, Video
– A thank you to Felix for the mention and the compliment
– If business only took care of its business this fast
– Do people really still think it is “speculators”….are they the new boogyman?
– It is obscene this took so long to act on
– Another nail in the Blockbuster coffin
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Thank you, Justice, Oil, Criminal, Video
– A thank you to Felix for the mention and the compliment
– If business only took care of its business this fast
– Do people really still think it is “speculators”….are they the new boogyman?
– It is obscene this took so long to act on
– Another nail in the Blockbuster coffin
Visit the ValuePlays Bookstore for Great Investing Books
Some tidbits…
– Starbucks finally decided to close some locations, 600 of them. Back in Feb. I said about the then announced plans, “100 US store closing just are not even the beginning of what is necessary”. Sorry folks….600…still not enough.
– Blockbuster (BBI) realized Circuit City (CC) sucks and 1 + 1 does not equal 3.
– Now that lead paint litigation is dying, Sherwin Williams (SHW) must look even more attractive to potential buyers.
– Berkshire Hathaway posted its worst first half in 18 years….has Buffett “lost it”? (please note sarcasm….)
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CEO Phillip Schoonover continues to be devoid of any reality……you have to read this.
Circuit City (CC) says its loss widened in the first quarter because of a 11.3% drop in sales at established stores ads it is also suspending its dividend. The soon to be extinct retailer reported a loss of $164.8 million, or $1 per share, compared with a loss of $54.6 million, or 33 cents per share a year ago. Circuit City Stores Inc. says revenue fell 7% to $2.30 billion from $2.49 billion.
For the Q2, Circuit City (CC) expects a loss of $170 million to $185 million. Analysts expect a loss of $143.4 million.
Lousy, right? Not according to Schoonover..
“In the first quarter, we continued to see improvement in many of our operating performance measures,” said Philip J. Schoonover, chairman, president and chief executive officer of Circuit City Stores, Inc. “We are rebuilding our selling culture and focusing on creating a good first and last impression with the customer. We have seen improved trends in our store close rate and in our services and accessories attachments, and we are delivering a better customer experience in our stores as evidenced by the upward trends in our third-party mystery shop scores. In short, the quarter represented improved execution and solid, steady progress towards our goals, and we expect to start to see year-over-year improvements in our financial results beginning in the second half of the year. I want to thank our associates for maintaining a sharp focus on expense controls, in order to build a more competitive cost structure, as well as for their hard work and dedication throughout the quarter.”
How about looking at some metrics that actually matter? Executive compensation? Sales collapsed, profits collapsed, margins fell, expenses as a percentage of sales rose, cash balances fell 74% to $94 million, accounts payable rose and debt rose 30%.
But wait, there is more:
“Crisp execution of our retail turnaround efforts remains our primary focus. The outcome of those efforts will position Circuit City well for the future and help us to capitalize on the anticipated improvement in the macroeconomic climate during the second half of the fiscal year,” concluded Schoonover.
Now, Phil, how about we just stop the collapse before we start talking about turning this thing around? Nothing good has happened in the three years you have been there.
If that was not enough, it would seem they are going to turn down the overture from Blockbuster (BBI). While I fell that it would be a disaster for Blockbuster, it would be the best thing for Circuit city holders as they will never see the price Blockbuster offered in this decade.
Said Schoonover, “As we previously announced, the board of directors is leading a process to explore strategic alternatives to enhance shareholder value, and that review continues. The board has not determined any course of action. As part of that process, today we filed a shelf registration statement with the Securities and Exchange Commission in order to give us greater flexibility to respond to strategic opportunities as they arise. Separately, during the quarter, we settled the potential proxy contest with Wattles Capital Management.”
What other choice could he possibly have? Nothing he has done in three years has worked. Just sell the damn things and give shareholder something….
The final slap in the face?
the company reaffirmed the following outlooks:
Fiscal 2009 Outlook
The company reaffirmed the following expectations for fiscal 2009:
— Consolidated net sales relatively unchanged from the prior year
— A mid-single digit domestic segment comparable store sales decline
Uh, any idea about little things like profits or losses? It kind of really does matter more than the other two above…
Jeez…one more
“For the second quarter, the company expects to record a loss from continuing operations before income taxes of $170 million to $185 million, compared with a loss of $128.2 million in the prior year second quarter. While the expected loss is larger than the prior year period, the year-over- year increase in the loss is significantly smaller than the increase in the first quarter loss.”
Translation? Q2 will suck also, just not as bad as Q1. I think they want a pat on the back for that.
Great job guys…
I am trying to come up with something funny to say but I cannot think of anything better than what is in this press release…
Disclosure (“none” means no position):None
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At least it is a step away from dvd’s in a store. That being said, it is far from an answer to what ails the company.
Dan Frommer had a great review of Blockbuster’s (BBI) product:
“Then will it fix Blockbuster’s problems? No.
Why not? Because there are very few use cases for a kiosk that rapidly transfers a digital movie to your iPod. It might make sense at the airport, where you can quickly grab a few movies before a long flight. But beyond that, it will rarely be the most convenient way to obtain digital media.
At home, an over-the-Internet movie download like Apple’s (AAPL) iTunes, Amazon’s (AMZN) Unbox, or Netflix’s (NFLX) streaming service makes much more sense — especially if there’s a way to play the movie on your TV. Why would you drive to Blockbuster — or anywhere — to download a movie to watch at home when you could do it from your living room?
And on the go, we imagine that over-the-air movie/TV services will develop/mature just as quickly as Blockbuster’s kiosks. So they won’t help much there, either.”
The key here is is still requires me to go somewhere to get a movie. While admittedly it will be great for travel locations, other than that, its use is limited.
The kiosk prototype, which will begin testing within the next three weeks, was developed by NCR Corp. (NCR). For the pilot launch, the kiosks will be compatible only with an Archos portable device. Blockbuster said it plans for the kiosk to be an “open system” and widely compatible with a range of devices. If it does not work with Apple’s (AAPL) ipod, it will fail. Folks will not go out and buy another device for this.
Blockbuster’s real and lingering problem is its core business, the DVD. Check out this interview with NetFlix (NFLX) CEO Reed Hastings about the new video streaming product.
Netflix is moving on full force into the future, Blockbuster, dipping its toes in the water..still
Disclosure (“none” means no position):None
At least it is a step away from dvd’s in a store. That being said, it is far from an answer to what ails the company.
Dan Frommer had a great review of Blockbuster’s (BBI) product:
“Then will it fix Blockbuster’s problems? No.
Why not? Because there are very few use cases for a kiosk that rapidly transfers a digital movie to your iPod. It might make sense at the airport, where you can quickly grab a few movies before a long flight. But beyond that, it will rarely be the most convenient way to obtain digital media.
At home, an over-the-Internet movie download like Apple’s (AAPL) iTunes, Amazon’s (AMZN) Unbox, or Netflix’s (NFLX) streaming service makes much more sense — especially if there’s a way to play the movie on your TV. Why would you drive to Blockbuster — or anywhere — to download a movie to watch at home when you could do it from your living room?
And on the go, we imagine that over-the-air movie/TV services will develop/mature just as quickly as Blockbuster’s kiosks. So they won’t help much there, either.”
The key here is is still requires me to go somewhere to get a movie. While admittedly it will be great for travel locations, other than that, its use is limited.
The kiosk prototype, which will begin testing within the next three weeks, was developed by NCR Corp. (NCR). For the pilot launch, the kiosks will be compatible only with an Archos portable device. Blockbuster said it plans for the kiosk to be an “open system” and widely compatible with a range of devices. If it does not work with Apple’s (AAPL) ipod, it will fail. Folks will not go out and buy another device for this.
Blockbuster’s real and lingering problem is its core business, the DVD. Check out this interview with NetFlix (NFLX) CEO Reed Hastings about the new video streaming product.
Netflix is moving on full force into the future, Blockbuster, dipping its toes in the water..still
Disclosure (“none” means no position):None
Here are the most read posts for May
1- Todd Sullivan’s – ValuePlays: Leucadia Releases 13-F: Can you Spell Concentrated Portfolio?
2- Todd Sullivan’s – ValuePlays: NetFlix Beats Blockbuster Again (update with video)
3- Todd Sullivan’s – ValuePlays: Circuit City On The Bankruptcy Express
4- Todd Sullivan’s – ValuePlays: Warren is Everywhere, Why?
5- Todd Sullivan’s – ValuePlays: “Complete Turtle Trader” Book Review
6- Todd Sullivan’s – ValuePlays: Phillip Morris Int. Tender Offer: Just How Dumb Does TRC Capital Think We Are??!!!??
7- Todd Sullivan’s – ValuePlays: Lampert Reports Sallie Mae Stake
8- Todd Sullivan’s – ValuePlays: GE to Sell Appliance Unit, Lampert Interested?
This is just beautiful……
Netflix (NFLX) CEO Reed Hastings gave a timeline for the company to convert its business to digital distribution: 5 years. After that, he believes the mail-order DVD business will peak and then start to decline.
“We think the by-mail business is very strong but will probably peak in the next five years. Our key challenge is growing earnings per share and subscribers while funding streaming which should give us years of subscriber and earnings expansion.”
This comes less than two weeks after the company rolled out its set-top box to good reviews.
The news here is the contrast between two companies. One doggedly hanging on to an outdated business model and being dragged into the current one and another, a pioneer in the current model already looking down the road at the next one.
Rather than buying a heap of problems at Circuit City (CC) and trying to convert its video rental stores in Apple (AAPL) store look-a-likes, Blockbuster ought to be using that energy and the money involved to try to leap ahead of Netflix in the download game. It has not ruined its brand yet and any box that streamed movies into the home would get a try by folks.
But, the longer they wait, the more the current offerings become entrenched with consumers and the harder, and more expensive, changing their behavior becomes.
But hey, Blockbuster will always have the less than 1% of the population that actually still likes going to the video store…
Disclosure (“none” means no position):None
Well, NetFlix (NFLX) is once again ahead of Blockbuster (BBI).
A review from Time:
“This week, a consumer-electronics company called Roku, in partnership with Netflix, launched a set-top box that brings us tantalizingly close to my dream. The Netflix player ($99 at netflix.com) is a palm-sized, black device that connects your broadband network (wired or wirelessly) to your TV. For as little as $8.99 a month, you can access Netflix’s library of 10,000 movies and TV shows on demand. Watch what you want, instantly, for as long as you want. You can even start a movie on your home TV, and finish watching it on your PC laptop at a hotel days later. Apple, which uses its own digital-rights management to copy protect films and TV shows, doesn’t support the Netflix on-demand service.
Setting up the Roku was about as painless an experience as I’ve had, and took less than 5 minutes. I cabled it to my TV, powered up both, then followed the on-screen prompts. The Roku device found my wireless connection immediately and asked for my password. I watched video by logging into my Netflix account (you’ll need one, which also entitles you to rent-by-mail DVDs) and adding movies and TV seasons to my “instant” queue; they show up on the Roku box almost instantaneously. I moldered on the couch for a few days, watching The Office reruns, some old Kubrick and Peckinpah movies and a Jimi Hendrix documentary. It was great.”
The news device caused Lehman Brothers (LEH) to upgrades the company:
On their recent earnings call, Blockbuster CEO Jim Keyes said “Our acquisition of Movielink provided both digital content and a distribution tool. Movielink integration is going well and proceeding as planned. We have a new online service in testing, in beta testing now and we are planning to make it available to all customers in June. The extensive library of over 9,000 titles gives us one of the largest digital VOD and day date electronic sell-through libraries in the marketplace.”
He continued “The remaining missing pieces of our digital offering are relating to subscription content. We are actively exploring opportunities to acquire content and to develop partners for distribution to the PC, the portable device, and ultimately to the home. These are just a few of the many examples of work underway in the digital space. I can assure you that Blockbuster has not at all backed away from an online strategy. We called a time-out from our by-mail initiatives, both to make that business profitable and to develop a plan for true digital delivery. I look forward to providing more updates to you in the weeks and the months ahead.”
Jim, see above…
Is this box going to be the “new way” next month? No. Eventually it will be and it gives Netflix a start and an immediate advantage. The bigger issue for Blockbuster shareholders is that once again they have been outflanked by Netflix. Wouldn’t it be nice if for just once Blockbuster was on the cutting edge of a new way to deliver content to the home? Second place is not all that bad unless you consider there are only two of you that really do it (three if you include Apple’s (AAPL) iTunes in which case Blockbuster is now third) it means that you are last.
Again.
Disclosure (“none” means no position):None
Well, NetFlix (NFLX) is once again ahead of Blockbuster (BBI).
A review from Time:
“This week, a consumer-electronics company called Roku, in partnership with Netflix, launched a set-top box that brings us tantalizingly close to my dream. The Netflix player ($99 at netflix.com) is a palm-sized, black device that connects your broadband network (wired or wirelessly) to your TV. For as little as $8.99 a month, you can access Netflix’s library of 10,000 movies and TV shows on demand. Watch what you want, instantly, for as long as you want. You can even start a movie on your home TV, and finish watching it on your PC laptop at a hotel days later. Apple, which uses its own digital-rights management to copy protect films and TV shows, doesn’t support the Netflix on-demand service.
Setting up the Roku was about as painless an experience as I’ve had, and took less than 5 minutes. I cabled it to my TV, powered up both, then followed the on-screen prompts. The Roku device found my wireless connection immediately and asked for my password. I watched video by logging into my Netflix account (you’ll need one, which also entitles you to rent-by-mail DVDs) and adding movies and TV seasons to my “instant” queue; they show up on the Roku box almost instantaneously. I moldered on the couch for a few days, watching The Office reruns, some old Kubrick and Peckinpah movies and a Jimi Hendrix documentary. It was great.”
On their recent earnings call, Blockbuster CEO Jim Keyes said “Our acquisition of Movielink provided both digital content and a distribution tool. Movielink integration is going well and proceeding as planned. We have a new online service in testing, in beta testing now and we are planning to make it available to all customers in June. The extensive library of over 9,000 titles gives us one of the largest digital VOD and day date electronic sell-through libraries in the marketplace.”
He continued “The remaining missing pieces of our digital offering are relating to subscription content. We are actively exploring opportunities to acquire content and to develop partners for distribution to the PC, the portable device, and ultimately to the home. These are just a few of the many examples of work underway in the digital space. I can assure you that Blockbuster has not at all backed away from an online strategy. We called a time-out from our by-mail initiatives, both to make that business profitable and to develop a plan for true digital delivery. I look forward to providing more updates to you in the weeks and the months ahead.”
Jim, see above…
Is this box going to be the “new way” next month? No. Eventually it will be and it gives Netflix a start and an immediate advantage. The bigger issue for Blockbuster shareholders is that once again they have been outflanked by Netflix. Wouldn’t it be nice if for just once Blockbuster was on the cutting edge of a new way to deliver content to the home? Second place is not all that bad unless you consider there are only two of you that really do it (three if you include Apple’s (AAPL) iTunes in which case Blockbuster is now third) it means that you are last.
Again.
Disclosure (“none” means no position):None
Blockbuster (BBI) reported net income for the first quarter of 2008 was $45.4 million, or $0.20 per diluted share, an improvement of $94.4 million as compared with a net loss of $49.0 million, or $0.27 per share, for the first quarter of 2007.
Total revenues decreased 5.4% to $1.39 billion for the first quarter of 2008 from $1.47 billion for the first quarter of 2007, as a result of fewer company-operated stores. Domestic same-store revenues increased 2.9% as compared to the first quarter of 2007, reflecting a 920 basis point improvement over the first quarter of 2007. This increase was driven by a 0.4% growth in same-store rental revenues and a 19.7% increase in same-store merchandise sales. International same-store revenues decreased 1.5% from the same period last year, reflecting a 0.9% increase in same-store rental revenues and a 4.9% decline in same-store merchandise sales. Worldwide same-store revenues grew 1.4% from the same period last year.
More importantly, they had a $124.5 million increase in cash flow provided by operating activities for the first quarter of 2008 to a deficit of $19.5 million from a $144.0 million deficit for the first quarter of 2007. Free cash flow (net cash flow used for operating activities less capital expenditures) for the first quarter of 2008 improved by $115.6 million as compared to the same period last year to a negative $39.4 million.
What happened? Essentially domestic same-store sales grew for the first time in five years and total revenue fell because of the decrease in company-owned stores.
Rather than having 5 blockbusters in a town, they decreased it to one and folks still went to the store. It has been just over a year since I first pleased for blockbuster to “increase the rate of store closures” and have posted the request countless times.
Now CEO Jim Keyes said “The significant improvement in our first quarter results demonstrates the underlying strength of our core rental and emerging retail business.” I would not go that far Jim, having less shareholder money go out the door to support poor stores and then having those folks rent from another location will improve your results but it does not necessarily mean the core business is strong. It does mean there is a base of customer and that you may finally be on the right track.
The only problem is the store rental base will continue to shrink as more folks go online for rentals or turn to the mail for them. Unless Keyes can convert these folks to his mail or kiosk concept. Blockbuster will continue to shrink. Last quarter the mail division subs were at 3.1 million, stable from the previous one. This need to grow as store rentals will continue to shrink. If it doesn’t, it means people are going elswhere.
Blockbuster may finally be on the right track, why on earth would they want to pay for the privilege of taking over Circuit City’s (CC) problems now?
Disclosure (“none” means no position):None
Circuit City (CC) CEO Phil “The Shill” Schoonover must be looking at sales numbers for the current quarter.
Schoonover has finally decided to open the books for Blockbuster (BBI) and billionaire Carl Icahn. A new letter to Blockbuster that was given to Circuit City from Icahn states that, “subject to him being satisfied with his due diligence review of Circuit City to be conducted concurrently with Blockbuster, Mr. Icahn and/or entities affiliated with him stand ready to purchase Circuit City if Blockbuster were unable to receive financing or required shareholder approval to do so after satisfactory due diligence, and assuming that required regulatory approvals are obtained.”
In an April 24th letter to Schoonover, Blockbuster CEO Jim Keyes said “We need to bring closure to this process. If we have not been provided the opportunity to begin due diligence by the close of business on April 28, 2008, we plan to announce that we are withdrawing our proposal to acquire Circuit City in light of your refusal to provide us access despite repeated efforts on our part to satisfy your concerns.”
Schoonover, at least smart enough to know this was his only option, relented.
Said Schoonover, “While the Circuit City board has confidence in the company’s ability to successfully implement its turnaround plan and generate shareholder value, we believe that we can best serve the interests of our shareholders by exploring all possible alternatives to enhance shareholder value. Let me be clear that our decision to allow Blockbuster and Carl Icahn to conduct due diligence should not be taken as an indication that the board has completed its review of the Blockbuster proposal, that the board has taken a position on the company’s value or that it has settled upon a particular strategic course of action.”
Translation? CC is in trouble and a purchase by either Blockbuster or Icahn are the only thing out there now that will save them and shareholders from destruction.
CC has been looking into a sale for quit some time now. Back in March I posted that they had retained Goldman Sachs (GS) as an “adviser” and speculated it was for a sale. It appears it was.
So, should we go buy shares anticipating a sale? No. There is no guarantee that CC management will be reasonable and get a deal done and Icahn, who is smarter than Schoonover in his sleep, will not pay more than he wants for the company.
Disclosure (“none” means no position):Long GS, None
Circuit City (CC) CEO Phil “The Shill” Schoonover must be looking at sales numbers for the current quarter.
Schoonover has finally decided to open the books for Blockbuster (BBI) and billionaire Carl Icahn. A new letter to Blockbuster that was given to Circuit City from Icahn states that, “subject to him being satisfied with his due diligence review of Circuit City to be conducted concurrently with Blockbuster, Mr. Icahn and/or entities affiliated with him stand ready to purchase Circuit City if Blockbuster were unable to receive financing or required shareholder approval to do so after satisfactory due diligence, and assuming that required regulatory approvals are obtained.”
In an April 24th letter to Schoonover, Blockbuster CEO Jim Keyes said “We need to bring closure to this process. If we have not been provided the opportunity to begin due diligence by the close of business on April 28, 2008, we plan to announce that we are withdrawing our proposal to acquire Circuit City in light of your refusal to provide us access despite repeated efforts on our part to satisfy your concerns.”
Schoonover, at least smart enough to know this was his only option, relented.
Said Schoonover, “While the Circuit City board has confidence in the company’s ability to successfully implement its turnaround plan and generate shareholder value, we believe that we can best serve the interests of our shareholders by exploring all possible alternatives to enhance shareholder value. Let me be clear that our decision to allow Blockbuster and Carl Icahn to conduct due diligence should not be taken as an indication that the board has completed its review of the Blockbuster proposal, that the board has taken a position on the company’s value or that it has settled upon a particular strategic course of action.”
Translation? CC is in trouble and a purchase by either Blockbuster or Icahn are the only thing out there now that will save them and shareholders from destruction.
CC has been looking into a sale for quit some time now. Back in March I posted that they had retained Goldman Sachs (GS) as an “adviser” and speculated it was for a sale. It appears it was.
So, should we go buy shares anticipating a sale? No. There is no guarantee that CC management will be reasonable and get a deal done and Icahn, who is smarter than Schoonover in his sleep, will not pay more than he wants for the company.
Disclosure (“none” means no position):Long GS, None
Ever hear the saying “throw some $#%t against the wall and see what sticks”? Thus seems to be Blockbuster’s (BBI) current business plan.
After being late to the video by mail model, late to the box top set model, talking about turning their obsolete locations into Apple Stores (AAPL) like locations, and attempting a doomed from the start takeover of Circuit City (CC), Blockbuster is trying something else.
Now Blockbuster is in talks about taking a stake in the new premium TV channel to be launched by Viacom with Lions Gate Entertainment (LGF) and Metro-Goldwyn-Mayer.
Ok. Haven’t we all come to the conclusion blockbuster doesn’t have the financial ability to complete the proposed Circuit city deal? How do they intend on doing this also? Have you ever seen a company run in so many seemingly disconnected directions at once?
This smacks of desperation. Blockbuster could survive and even prosper and compete with Netflix (NFLX) if they would only acknowledge what everyone but them seemingly understands, they need to close their stores. Should that happen, the cash save could possibly finance one or some of the shotgun like business moves they are contemplating. They cannot, however, keep them and do the others..
I guess the only thing left to do for them is to talk about a merger with Sprint (S)?
Disclosure (“none” means no position):None
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The latest pondering out there has the proposed Circuit City (CC) and Blockbuster (BBI) the equivalent to the merger of Sears and Kmart that created Sears Holdings (SHLD). While a nice exercise, it lacks one thing, legitimacy.
For the best analysis of the exercise, read here:
Here is were is falls apart and it does so before it actually get started really. Sears and Kmart did the same thing, retail. Specifically clothing, lawn and garden, electronics, auto and the rest of the big box general retailer gambit. The combination of the two created the nation’s third largest retailer with sales of over $50 billion a year. The combination of BBI and CC will do nothing to increase the size of either in their prospective industries.
Blockbuster rents dvd’s and Circuit City sells them it their stores. They also both…..well…..they don’t do anything else in common. Other that the fact they both have dvd’s in their stores, the two businesses have no similarities at all, other than poor management.
A Circuit City and RadioShack (RSH) merger would be a similar comparison to Sears / Kmart as those businesses are very similar. There would be, in that case, cost savings involved with the merger that could be realized and the two businesses would have selling synergies that could boost results. Also there is the little reality that RadioShack’s Julian Day could out-manage CC’s Phil Schoonver in a coma.
One also has to remember the Sears / Kmart merger has produced a 10 fold increase in shareholder value, does anyone out there actually think a Circuit City / Blockbuster one will produce even remotely similar results? Anyone? Does anyone actually think they will be even profitable considering the debt load necessary to pull off the deal?
Other than the fact that both situations involved two companies merging, there are virtually no other similarities.
Disclosure (“none” means no position):Long SHLD, none
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