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Redbox's parent down 25% on warning

By Aaron Smith, staff writer


NEW YORK (CNNMoney) -- Coinstar Inc.'s stock price fell Friday as the owner of the movie rental service Redbox pays the price for lowering its earnings guidance.

Coinstar (CSTR) plunged 25% after the company lowered guidance for sales and profit late Thursday. The company cut its fourth-quarter sales forecast to $391 million, from its previously announced range of $415 million to $440 million.

The company also lowered guidance on earnings, to a range of 65 cents to 69 cents a share, compared to the previously announced range of 79 cents to 85 cents.

Coinstar provides "coins to cash" self-service kiosks, typically located in grocery stores, charging a fee of 9.8%. The company also provides financial services, like money transfers and prepaid debit cards.

But it's the Redbox unit, which provides DVD rental kiosks and competes with the online renter Netflix (NFLX), that's causing concern.

Redbox offers movies 28 days after their Hollywood release, and that delay, combined with higher prices for Blu-Ray discs, was the source of the lowered forecast, according to Chief Executive Paul Davis.

"This was Redbox's first holiday season with 28-day delayed titles and we underestimated the impact that the delay would have on demand during the fourth quarter," said Davis in a press release. "We also expected much better performance from Blu-ray and had purchased to a higher level of demand."

Davis added, "While consumer visits to the kiosks remained strong, the number of movies per visit, or basket size, was lower than planned."

Coinstar is scheduled to release its fourth-quarter results on Feb. 3. To top of page

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