Coinstar Falls After DVD Revenue Misses Analysts' Estimates
DVD sales rose less than anticipated because of agreements with three studios that delayed Redbox’s access to new releases by 28 days early in the quarter. Source: RedBox via Bloomberg
Coinstar Inc., owner of the Redbox movie-rental kiosks, fell in extended trading after delayed access to some new releases reduced second-quarter DVD revenue.
Sales rose 35 percent to $342.4 million, Bellevue, Washington-based Coinstar said today in a statement. That was less than the $381.3 million average of seven analysts’ estimates compiled by Bloomberg.
DVD sales rose less than anticipated because of agreements with three studios that delayed Redbox’s access to new releases by 28 days early in the quarter. The deals ended legal battles with News Corp.’s Twentieth Century Fox, General Electric Co.’s NBC Universal and Time Warner Inc.’s Warner Bros.
“It did pull the top line down,” Chief Executive Officer Paul Davis said on a conference call. “As we cycled through this rotation and we started seeing new titles from the studios every week, it started to improve.”
Coinstar tumbled $3.41, or 7.1 percent, to $44.68 in extended trading after the results came out. The stock retreated 7 cents to $48.09 at 4 p.m. New York time in Nasdaq Stock Market trading and has gained 49 percent this year.
The company also said it was accounting for its money- transfer business as a discontinued operation, complicating comparisons. Still, sales from DVD rentals fell short of investor expectations, Michael Pachter, an analyst at Wedbush Securities in Los Angeles, said in an e-mail. He estimated the money-transfer unit accounted for about half of the shortfall.
Blu-ray Discs
In a separate announcement, Coinstar said it has begun stocking more than 13,000 kiosks with high-definition Blu-ray versions of movies to rent for $1.50 a day. The company expects to offer Blu-ray discs at all of its 23,000 locations the fourth quarter, according to a statement.
Second-quarter revenue was within the company’s forecast when the money-transfer and recently sold electronic payment businesses are taken into account, Chief Financial Officer Scott Di Valerio said in an interview. The company has said it plans to sell the money-transfer operation.
Profit this quarter will be 46 cents to 52 cents a share on sales of $370 million to $390 million, Coinstar said. Analysts were projecting 61 cents on sales of $406.5 million, the average of seven estimates compiled by Bloomberg.
The company incurred additional expenses in the second quarter because of the decision to drop the DVDXpress brand and costs related to new movie supply agreements with Sony Corp. and Viacom Inc.’s Paramount Pictures, according to the statement.
Net income increased to $13.4 million, or 41 cents a share, from $6.96 million, or 23 cents, a year earlier, Coinstar said. Excluding a gain, profit of 39 cents beat 33-cent average of seven analysts’ estimates compiled by Bloomberg.
Coinstar is picking up customers as Blockbuster and Movie Gallery close stores. Movie Gallery, based in Dothan, Alabama, filed for bankruptcy protection in February and began closing stores. Blockbuster, the largest movie-rental company, also has closed outlets in the face of increased competition from Netflix Inc.’s mail-order service and Redbox.
To contact the reporter on this story: Michael White in Los Angeles at mwhite8@bloomberg.net.
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