FINANCE

Blockbuster to Test Prices, Store Formats

BY CSA STAFF

New York City, Blockbuster Inc. said on Thursday it plans to test different models for pricing and store formats, according to a Reuters report.

CEO Jim Keyes said Blockbuster would experiment with store layouts to add downloading stations, books or beverages in a bid to shore up its customer base. He expects the new emphasis on stores to turn around falling same-store sales and rental revenues. But he said that change would not come in the fourth quarter, nor would the initiatives be “an overnight success.”

The company was looking at recapturing some of the revenue it lost when it abolished late fees and allowed some online customers to exchange DVDs for free at its stores, Keyes said. Tightening the number of days that customers can keep films also will help boost in-store inventory and mend Blockbuster’s reputation for being out of stock on first-run titles.

Blockbuster posted a wider quarterly loss on Nov. 1 as it closed stores around the world. It has since focused on boosting sales at its remaining stores and keeping away from its online battle with Netflix Inc.

Blockbuster is looking for promotional partnerships with movie studios and manufacturers for exclusive product tie-ins, such as proprietary toys or beverages linked to DVD releases, Keyes said.

To avoid being saddled with excess inventory, Blockbuster plans to negotiate risk-sharing arrangements with the studios and use management systems at its U.S. stores to let local store operators manage product assortment and inventory.

Ideas for its retail format include creating an interactive area in stores for children, a destination for downloading entertainment onto portable media devices or a kiosk for Sony Corp’s PlayStation 3 video-game console. Another option was to place kiosks in high-traffic areas such as airports or shopping malls, Keyes said.

To that end, Blockbuster planned to cut back on advertising for the next six months as it formulates its new plans and evaluates its current marketing strategy, Keyes said.

The company also seeks ways to build up digital distribution for films, including merging its Blockbuster.com Internet site for ordering films by mail with its Movielink download service, and partnering with telecom and cable companies, Keyes said.

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Study: Premium food popularity growing

BY CSA STAFF

LYON, France A Reportlinker.com report determined that retail sales of gourmet, specialty and premium foods and beverages are growing at much at a faster pace than those of the overall food and beverage industry in the United States, surging 10.9% to $59 billion in 2007 and maintaing a compound annual growth rate of 11.1% for the 2003 to 2007 period.

Greater availability of gourmet and premium products, growing interest in world cuisines and flavors, the association of high-quality ingredients with health and wellness, overlap of gourmet and natural/organic, the supermarket industry’s focus on upscale “fresh formats,” higher disposable incomes among U.S. consumers, and product positioning as affordable luxuries have enticed the consumer and driven sales. Such factors have helped produce a growing population of willing-to-spend consumers who are looking for foods that are more adventuresome and yet more nutritious.

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Gap Inc. October comps fall

BY CSA STAFF

SAN FRANCISCO Gap Inc. today reported a comparable-store sales decrease of 8% for the four weeks ended Nov. 3, compared to 7% for the period ended Oct. 28, 2006. The company reported net sales of $1.23 billion for the October 2007, which represents a 1% decrease compared with net sales of $1.24 billion for the same period last year.

By segment, comps for Gap North America fell 7% versus a 4% drop last year, Banana Republic North America comps were down 2% versus a 2% growth last year, Old Navy North America comps dropped 11%, same as last year, and international comps were down 6% versus a decrease of 8% last year.

“While comparable-store sales were down in October, merchandise margins were significantly above last year,” said Sabrina Simmons, evp of Gap Inc. finance. “The results reflect our stated strategy of managing inventory tightly to support margin improvements.” 

For the thirteen weeks ended Nov. 3, total company net sales were $3.85 billion, which is flat as compared to net sales of $3.85 billion for the thirteen weeks ended Oct. 28, 2006. The company’s third quarter comparable-store sales decreased 5% compared with a decrease of 5% in the third quarter of the prior year.

For the third quarter of fiscal year 2007, Gap Inc. expects diluted earnings per share to be 28 cents to 30 cents, as the company continues to make progress on its strategies of driving earnings with healthy margins and controlling expenses.

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