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Coinstar Revenue Rises 31%; Delayed Access To Latest DVDs Hurts Redbox Performance

Posted On: 1/19/2011

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Coinstar Inc., Coinstar fourth-quarter sales, Redbox, DVD vending machine, movie rentals, coin counting machines, vending, vending machine, vending machine business, automated retailing, self-service kiosk, Blu-ray, Paul Davis

BELLEVUE, WA -- Coinstar Inc. said preliminary fourth-quarter sales and profits missed projections because delayed access to the latest DVD titles hurt sales at its Redbox DVD vending machines during the 2010 holiday season.

As a result, the company revised its guidance, expecting revenue for the fourth quarter of 2010 to increase 31% year over year to $391 million, or 65¢ to 69¢ a share, compared with previous guidance in the range of $415 million to $440 million, or 79¢ to 85¢ a share.

As part of a settlement last year, Coinstar agreed to wait until 28 days after the Hollywood studios release DVD titles before renting them through its kiosks.

"This was Redbox's first holiday season with 28-day delayed titles, and we underestimated the impact that the delay would have on demand during the fourth quarter," said chief executive Paul Davis.

Coinstar also said that, in anticipation of demand for new releases that did not materialize, Redbox removed older inventory early, impacting revenue and gross margin. Additionally, Redbox customers reportedly utilized its "rent and return anywhere" to a higher level than expected, which caused temporary imbalances in available titles across the kiosk network. Lower-than-expected performance of Blu-ray rentals also hurt revenue.

The Bellevue, WA-based company said it plans to report full results on Feb. 3. For fiscal 2011, the company forecast profit $2.60 to $3.50 a share on revenue of $1.7 billion to $1.85 billion.

Coinstar Inc. (NASDAQ: CSTR) is a leading provider of automated service solutions for retailers. Its core products are Redbox self-service DVD rentals and Coinstar brand self-service coin-counters. The company says it operates approximately 49,000 machines -- 30,000 DVD and 18,900 coin-counting kiosks -- deployed in supermarkets, drugstores, mass merchant stores, financial institutions, convenience stores and restaurants.