Blockbuster Sees Sector Weakness

Blockbuster Inc., the largest U.S. video-rental chain, Tuesday said Hollywood’s sagging box-office revenue would hurt its second-quarter earnings and cast doubt about the company’s financial performance for the rest of the year.

The company quoted Chief Executive John F. Antioco as saying Blockbuster was taking unspecified “aggressive actions” in the second half of the year to cope with continued weakness in the video rental industry.

Antioco’s remarks were made to those holding Blockbuster debt and were released later by the Dallas-based company. Blockbuster’s shares dropped 53 cents, or 6.2%, to $8.09.

Domestic box-office receipts are off about 8% from a year earlier.

Blockbuster is expected to report its earnings Tuesday. Analysts surveyed by Thomson Financial were forecasting a second-quarter loss of 9 cents a share. Blockbuster has had a tumultuous year, capped by a successful proxy fight led by financier Carl Icahn, who criticized the company for spending too much. Icahn and two allies won seats on the board but retained Antioco as CEO and chairman.

Blockbuster, which has 9,100 stores worldwide, has been pummeled as consumers opt to buy DVDs rather than rent them, and as online video renting flourishes, led by Netflix Inc. Blockbuster recently started its own online service.

The company also has been hurt by video-on-demand and pay-per-view services offered by satellite and cable operators.

Other video chains have been suffering as well. The nation’s second-largest chain, Movie Gallery Inc., reported last month that revenue from stores open at least a year fell 5.5% from a year earlier.