Coinstar Inc. (CSTR:US) fell the most in more than six months after the owner of Redbox DVD kiosks said a weak film lineup this quarter will cause results to miss analysts’ estimates.
Coinstar dropped 7 percent to $48.47 at the close in New York, the biggest decline since July 27, after the Bellevue, Washington-based company released fourth-quarter earnings and its first-quarter forecast yesterday.
Fewer new releases on DVD will diminish sales and profit this period, Chief Financial Officer Scott Di Valerio said in a telephone interview. He said the company also needs to bring back customers who stopped renting during the third quarter, when content also was weak.
“It’s going to take a while with the third quarter content, how bad it was, to get them back in,” said Di Valerio, who will become chief executive officer on April 1. “We saw some good trends in the fourth quarter, which was good, but also looking at the first quarter, some of the releases aren’t as good as they were last year.”
The company stocked 12 new titles in January compared with 23 in January 2012, Di Valerio said. Profit excluding some items this quarter will range from 77 cents a share to 92 cents, the company said, on sales of $568 million to $593 million. That’s below analysts’ projections for profit of $1.24 a share on revenue of $623.2 million.
“It’s a content question and a question of continuing to drive folks to our kiosks,” Di Valerio said. “We feel as we hit the back half of the year, we’ll be hitting on all cylinders and driving revenue per kiosk.”
To lure customers back, Coinstar is refurbishing its kiosks to create space for 80 more discs, in addition to the 600 that machines now hold, giving customers more choices. Typically, the 600 disks include about 100 different titles, Di Valerio said.
Fourth-quarter net income declined 27 percent to $22.9 million, or 75 cents a share, from $31.5 million, or $1, a year earlier, the company said in a statement. Profit excluding some items was 93 cents.
Sales, while rising 8.4 percent to $564.1 million, were below the $580.2 million average estimate of analysts polled by Bloomberg, hurt by results from kiosks acquired from NCR Corp. (NCR:US)
Coinstar is expanding beyond DVD rentals to include the Redbox Instant movie streaming service, a joint venture with Verizon Communications Inc. (VA:US), event ticket sales and Rubi, a coffee kiosk business. Redbox Instant, which will compete with Netflix Inc. (NFLX:US) and Amazon.com Inc., is in public testing and is scheduled to officially open by the end of this quarter.
The service combines Redbox kiosk discs with online rentals and a streaming library of movies that come with a monthly charge of $8 to $9 a month. Redbox Instant said this week that it launched its app on Microsoft Corp.’s Xbox 360 console.
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