The boss of the UK arm of embattled US DVD rentals chain Blockbuster has vowed that the retailer has a future and is not seeking to exit large swathes of its 638-store portfolio.
Blockbuster UK managing director Martin Higgins said it is “a major misconception that our business is a dying format” and that “rental is very affordable in the recession”.
Last week parent Blockbuster warned it may apply for Chapter 11 bankruptcy protection as it labours under a heavy debt burden, raising fears over its UK arm. Earlier this month, it put its European arm of the business up for sale.
Higgins said: “Blockbuster UK is a separate legal entity. In the unlikely event that our parent company in the US goes bankrupt, it would have no operational impact on Blockbuster UK.”
He also claimed the sale of the business would have little impact on the operational running of the UK arm. He said: “People think we’re closing down and it’s quite the reverse. This is a good business and we can be relatively optimistic a sale will go through.”
However, private equity houses do not seem keen to take on the business, and one source told Retail Week that Blockbuster does not have a clear purpose in the UK market.
Last month, it emerged the retailer had hired KPMG to negotiate rent reductions with the landlords of its stores in the UK, in order to trim costs. Higgins denied the retailer is looking to exit stores.
“We’re not on any programme to close stores, other than when a lease expiry comes up in a bad location,” said Higgins. “Very few stores lose money. There are maybe seven or eight we’d like to exit.”
Blockbuster’s business model has come under threat from internet-based rivals, such as postal DVD rental company Lovefilm.com, which has far lower overhead costs as it has no stores.
However, Higgins said Blockbuster UK is trading well, with like-for-likes in its rental business up 6% in 2009. He said like-for-likes in the year to date are “not going backwards”. EBITDA grew 18% in 2009.
He added that legitimate downloading of films only accounts for 3% of film studios’ income in the UK, and when that grows, Blockbuster will engage more in the channel.