Redbox president resigns; parent company’s stock falls 10%
The president of Redbox unexpectedly said he would be leaving the kiosk DVD rental company as the firm’s parent company, Coinstar Inc., reported preliminary results for the second quarter that disappointed Wall Street.
Coinstar stock then plummeted 10% in after-hours trading.
The company announced Mitch Lowe’s resignation Wednesday along with early financial results for the quarter ended June 30. Revenue was $434 million to $436 million, Coinstar said, lower than a consensus estimate among Wall Street analysts of $446 million.
Earnings per share, meanwhile, were between 96 cents and $1, higher than analysts’ estimate of 81 cents.
Executives at two Hollywood studios that work closely with Redbox said they were surprised by the news of Lowe’s departure. He has been with the company since 2003, when it was owned by McDonalds and had only a dozen kiosks. Redbox, which has transformed the home entertainment business with its $1-a-night rentals, now has more than 31,800 kiosks in grocery stores, convenience stores and other retail locations.
Lowe regularly commuted to Redbox’s Illinois headquarters from Mill Valley, Calif. He previously was a founding executive at Netflix, which is headquartered close to that Northern California city.
Coinstar stated that Lowe resigned “to pursue entrepreneurial and other interests,” but it did not elaborate. The company said he will stay in his post until a replacement is found, and that an external search has already begun.
Many in Hollywood have become concerned that Redbox’s $1-per-night rentals undermine more profitable video-on-demand services and disc sales. As a result, four of the six major movie studios either forbid or impose financial incentives discouraging Redbox from renting their movies until 28 days after the DVD goes on sale.
That led to a disappointing financial performance in the fourth quarter of last year, when the company underestimated how big the effect of those delays would be on consumer demand. But Redbox’s business stabilized in the first quarter of 2011.
The company also announced a $250-million stock buyback and a new $450-million credit facility to pay down debt and for working capital.
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