Coinstar Reveals Loss of Safeway as a Customer
Coinstar Inc. said Wednesday that it lost its third-largest customer, supermarket chain Safeway Inc., prompting the electronic coin-counting machine operator to trim its yearly earnings forecast.
Pleasanton, Calif.-based Safeway, a Coinstar customer for nine years, represented about 10%, or about $18 million, of Bellevue, Wash.-based Coinstar’s total revenue in fiscal 2002, Coinstar said.
“It was a very unfortunate, a very regrettable outcome for us,” Coinstar President Rich Stillman told Reuters. He said the two companies had failed to agree on a new contract for purely economic reasons.
The news sent Coinstar stock falling in after-hours trading and had some investors fuming. In after-hours activity, Coinstar shares, which closed at $18.94 on Nasdaq, fell to $14.08.
“Right now, you guys have absolutely zero credibility,” Bill Wolfenden, a portfolio manager with San Francisco-based RS Investment, said during Coinstar’s conference call with investors and analysts. “We peppered you on Safeway for months now.”
Coinstar said it now expects 2003 earnings of $16.5 million to $19 million, or 74 cents to 85 cents a share, down from a May forecast for earnings of 83 cents to 97 cents a share.
Analysts had expected 2003 earnings of 96 cents a share on average, according to market research firm Thomson First Call.
Coinstar also backed its previous guidance for the second quarter. It expects to report quarterly earnings of 15 cents to 19 cents a share.
About 1,083 of Coinstar’s 10,000 coin-counting machines were located in Safeway stores, the company said.
A representative from Safeway could not be reached for comment.
Coinstar operates a network of machines in stores of 250 supermarket chains in the U.S., Britain and Canada. The machines keep 8.9% of the total amount of coins consumers pour into them to tabulate. Coinstar then shares 11.2% of its cut, or about 1% of the total, with the host supermarket.
In 2002, customers poured about $1.7 billion in change into its machines, Coinstar said.
