Blockbuster says it intends to reduce its costs by more than $100 million next year and an additional $50 million 2007.
The company reported yesterday (Nov. 8) that it will accomplish this “through a combination of overhead reductions, lower marketing spend and operational savings from non-core divestitures,” according to a statement.
The news came in conjunction with the rental chain’s disappointing third quarter financial results.
Blockbuster’s third quarter revenue decreased 1.7% to $1.39 billion from $1.41 billion for the third quarter of 2004. Total worldwide same-store revenues decreased 3.8% compared to last year’s third quarter. Same-store rental revenues also decreased 2.5%.
Gross profit decreased 8.3% to $790.5 million from $861.5 million in the third quarter of 2004. The chain’s net loss totaled $491.4 million in the third quarter.
Blockbuster says it will reduce its annual capital expenditures in 2006 “primarily due to fewer new store openings.” However, the company says it will continue to invest at “approximately the same levels” in its Blockbuster Online service.
In its effort to focus on the Blockbuster brand, the chain is selling its theatrical, home entertainment and TV production company DEJ Productions.
First Look Studios is buying DEJ for about $25 million. The deal is expected to close in the fourth quarter.