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Redbox stock is slammed after company reduces sales forecast

A customer returns DVDs at a Redbox kiosk in Santa Monica.
(Lawrence K. Ho / Los Angeles Times)
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Investors have been battering the company that owns the Redbox DVD kiosks after the company cut its forecast for third-quarter and full-year earnings because customers are keeping movies fewer days.

Outerwall Inc. shares are down 13% from Monday’s close and have lost 26% since reaching a 52-week high on July 25.

The company, which also operates Coinstar coin-counting kiosks, said Tuesday that its revenue has been lower than expected because of a promotional discount campaign and because people kept movies for fewer nights in August.

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The bad news came suddenly for Outerwall, which reported its best month ever in July, with about 74 million movie rentals.

Outerwall, based in Bellevue, Wash., lowered the high end of its revenue forecast for the year to $2.34 billion from a previous high of $2.48 billion.

“Although both rentals and revenue for Redbox increased significantly in July and August over 2012 levels, they were not to our expectations,” Outerwall Chief Executive J. Scott Di Valerio said. “In addition, heightened promotional discount activity, which added new customers during the quarter, had an adverse impact on the expected average transaction size and we believe drove consumers toward more single night rentals.”

The company’s stock was trading at $48.25 at 8 a.m. Wednesday, down $1.24 or 2.5%, after shedding nearly 12% on Tuesday.

Outerwall, which was formerly known as Coinstar Inc., operates about 43,000 Redbox movie-rental kiosks in the United States and Canada and about 20,000 coin-counting kiosks in the United States, Canada, Puerto Rico, Ireland and Britain.

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