DISH Closes More Blockbuster Stores - Analyst Blog
February 19 2013 - 1:00PM
Zacks
DISH Network Corp. (DISH), the second largest
satellite TV operator in the U.S. after DIRECTV
(DTV), plans to shut down another 129 Blockbuster stores in the
U.K., thereby taking a pretax charge of $46 million on the latter’s
assets.
Few days back, DISH Network planned to close down 300 of its 830
stores. So, winding up another 129 stores will bring the total
number of Blockbuster stores in the country to 401.
The stores, which will be closed in the coming weeks are either
underperforming or almost on the verge of their lease terms.
Consequently, the move will help DISH Network to improve its
operating margin going forward. However, the company did not
disclose the store locations that will be shutting down its
operations.
Dish Network continues to lose subscribers as they faced stiff
competition from online movie distribution companies like
Netflix Inc. (NFLX), Amazon.com
Inc. (AMZN) and Hulu. Therefore, to counter such
challenges, the company bought Blockbuster Inc. out of bankruptcy
on Apr 26, 2011, for $320 million. The acquisition has not only
helped the company to set a new revenue platform but at the same
time has also enabled Dish Network to expand its huge collection of
movies.
When Dish acquired Blockbuster, the video rental company had
about 1700 stores across the US. But ever since its takeover, the
company has been facing intense competition from other video
streaming companies providing cheaper movie download options and
was forced to close down 500 stores last year.
During the last nine months, Blockbuster contributed $817
million revenue, which is just 7.7% of the total revenue generated
by DISH Network over the given period. Moreover, revenue
contribution from Blockbuster continued to decline over the last
three quarters without any improvement.
A continuous loss of subscribers has forced DISH Network to keep
its mounting programming costs under control rather than passing it
over to its subscribers. So, the best possible option for the
company is to trim down unprofitable businesses in order to control
cost.
Currently, DISH Network carries a Zacks Rank #3 (Hold).
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