(By Salman - iStockAnalyst Writer)Blockbuster Inc. (NYSE: BBI) is scheduled to release third quarter earnings after the market close on Thursday, November 12, 2009. Analysts, on average, currently expect the company to report a loss of 11 cents a share on revenue of $1.01 billion. In the year ago quarter, the company reported a net loss of 11 cents per share (8 cents per share excluding items) on revenue of $711 million.

Blockbuster Inc. primarily operates and franchises entertainment-related stores offers movies and video games for in-store rental, and sale and trade, as well as sells other entertainment-related merchandise.

In August, the Dallas, Texas-based reported that its second-quarter loss narrowed to $39.7 million, or 21 cents a share, from $44.7 million, or 23 cents a share, in the prior-year period. On an adjusted basis, Blockbuster reported a loss of 19 cents a share. Revenue dropped to $1.02 billion from $1.3 billion. Analysts, on average, expected the company to report a quarterly loss of 10 cents a share on revenue of $1.11 billion.

Gross margin for the quarter was 55.0%, compared to 50.2% in the year-ago quarter.

In a filing with the U.S. Securities and Exchange Commission in September, the video rental chain announced that a series of "accelerated closures" will take the total number of closures to between 810 and 960 stores by the end of 2010. Blockbuster was previously looking to close up to 450 of its most unprofitable stores in 2009 and 2010. As of mid-August, Blockbuster had closed 276 stores so far this year. The company said the closures are part of its strategy to focus on portfolio optimization opportunities by closing unprofitable stores and refocusing efforts to improve four-wall profitability. Blockbuster said it is also trying to change or end leases on 275 to 300 stores and convert an additional 250 to 300 outlets. The company expects the 2009 and 2010 store closures to help boost profitability. Blockbuster estimates that it will save $30 million from avoiding ongoing losses at the stores it will close, and that between $20 million and $30 million of existing revenue from those locations will transfer to others. However, the company noted that terminating the leases will cost it $60 million. The company noted that 18% of its stores are unprofitable, while 47% more of its stores are mildly profitable and non-core. A core 35% of the company's stores contributed 80% of its retail profits.

The company has been hit hard by reduced entertainment spending by consumers coupled by stiff competition from Netflix (NASDAQ: NFLX), which sends rentals through the mail; and Coinstar' s (NASDAQ: CSTR) Redbox, which rents movies for a dollar from kiosks at convenience and grocery stores. Netflix lured customers by building up its library of movies available for instant viewing over high-speed Internet connections. Similarly, Redbox also has been hurting Blockbuster with its red kiosks that rent DVDs for just a $1 per night. According to market research firm NPD Group, Redbox and its vending rivals now have 19 percent of the rental market, compared with 36 percent for rent-by-mail services (Netflix) and 45 percent for traditional stores. NPD estimates that vending will grow to a 30 percent share by the end of next year, at the expense of traditional stores. Blockbuster too has started to introduce rental kiosks. There are now about 500 Blockbuster Express machines, and plans call for 2,500 more by the end of the year. The company expects to open 7,000 in 2010.

Among other developments, early in October Blockbuster closed a $675 million debt offering due in 2014, nearly twice as much money as the rental-video chain had hoped to raise as it takes steps to improve its finances. The Dallas-based company said it remains on track to cut expenses by $200 million this year, with $166 million already reduced in the first half. It said further that it will continue to seek ways to boost efficiency; including divesting of non-core assets outside North America. The recent moves are expected to ease financial pressure on the company.

In terms of stock performance, Blockbuster shares are down 46% since the beginning of the year. Shares of the company fell 37 cents or 4.16% to $.085 in morning trade on Friday.

Disclosure: Author doesn't own any of the stocks discussed here.