Redbox Owner Outerwall Drops After Discounts Cut Outlook

Outerwall Inc., owner of the Redbox DVD kiosks, fell to its lowest level in nine months after cutting its third-quarter and full-year forecasts because of discounts and shorter rentals.

Outerwall, formerly known as Coinstar Inc., fell 13 percent to $48.84 at 10:05 a.m. in New York and earlier traded at $46.25, its lowest level since Dec. 4. The shares had gained 7.6 percent this year through yesterday.

Sales this quarter will be $569 million to $589 million, below an earlier prediction of as much as $630 million, the Bellevue, Washington-based company said yesterday in a statement. Profit excluding items will be 82 cents to 94 cents a share, less than the $1.36 to $1.51 a share seen previously.

Outerwall’s DVD promotional strategy, while bringing in customers, led to more single-night rentals and revenue that was less than projected, according to the statement. The Redbox vending machines posted their best month ever in July, with rentals increasing 13 percent to about 74 million from a year earlier. Shoppers kept movies out for fewer nights in August, too, Outerwall said.

The company is reducing its content costs and direct operating expenses to counter the change in consumer behavior, said Chief Executive Officer J. Scott Di Valerio.

“Redbox has numerous promotions and discounted offers at varying levels encouraging increased rental activity,” Marci Maule, a spokeswoman, said in an e-mail. “We’re not referring to a single promotion.”

For the year, the company sees revenue of as much as $2.34 billion, below the previous peak forecast of $2.48 billion made in July. Profit excluding items will be as much as $5.12 a share, below the $5.76 to $6.26 a share seen earlier.

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