Blockbuster Swings to Profit in 1Q

New York City Blockbuster posted a higher-than-expected quarterly profit as it cut costs by closing stores, reducing advertising and overhead expenses.

Blockbuster, which has offered to buy Circuit City Stores for up to $1.3 billion, said domestic same-store sales are up for the first time in five years due to a better line-up of new movies, improved in-store merchandising and more effective pricing.

Net profit was $45.4 million for its fiscal first quarter that ended April 6, compared with a year-earlier loss of $49 million.

While quarterly revenue missed expectations, Blockbuster cut selling, general and administrative expenses by $100.5 million on reduced advertising and lower overheads.

Chairman and chief executive Jim Keyes said in a statement that the company's Total Access program, which lets subscribers swap DVDs at Blockbuster stores for unlimited free rentals, was now profitable.

Domestic same-store sales rose 2.9%, driven by a 19.7% rise in merchandise sales and a 0.4% in rental revenue, the company said.

Overall quarterly revenue fell 5.4% to $1.39 billion as Blockbuster closed stores.