News

Shift Could Shrink Blockbuster Margin

2/16/2003 7:00 PM Eastern

Salomon Smith Barney Inc. analyst Margaret Blaydes reiterated her "in-line" rating on Blockbuster Inc. last week, but cautioned that the company's move from video rentals to DVD sales could cause continued margin contraction. Blockbuster reported strong revenue for the fourth quarter, fueled manly by a 55 percent rise in merchandise sales, mostly DVDs. Cash-flow margins — or cash flow as a percentage of revenue — dipped to 7.9 percent from 12.9 percent a year earlier. "The business mix shift to emphasize retail sell-through and video games should add to gross profits and free cash flow," Blaydes wrote in a report.

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