PORTLAND, Ore. -- With same-store sales up 7.4% in the third quarter of 1996, leased-space operator BlowOut Video here has set its sights on more supercenter growth and adding more supermarket chains to its roster.
"We've embarked on a plan of controlled growth," said Steve Berns, president and chief executive officer. "We believe that it will be a combination of growth with the nation's largest retailer, Wal-Mart, and growth through selective regional grocery chains, including Ralphs."
Berns would not comment on how many stores the company expects to add next year and what other supermarket chains are candidates for BlowOut store-within-a-store video departments. BlowOut was spun off as a separate public company by shared-transaction-fee distributor Rentrak Corp., Portland, Ore., last month.
The company now operates video sections in 12 stores of Ralphs Grocery Co., Compton, Calif. -- six in Ralphs supermarkets and six in Food 4 Less units; 153 in Wal-Mart Supercenters, Bentonville, Ark.; and 35 in Super Kmart Centers operated by Kmart, Troy, Mich. Three departments in Super Kmart Centers have opened during the fourth quarter. The company has also closed down 26 underperforming units during 1996, 23 in Wal-Mart Supercenters and three in Super Kmart Centers. The Ralphs departments are doing "very well," noted Berns.
"We inherited a lot of stores that were underperformers. We've given them every opportunity to turn around. Most of them have, but some have not," said Berns. BlowOut was created in 1995 out of four separate corporations that were operating the departments, and has since opened more at a rapid clip, keeping up with the expansion of the Wal-Mart Supercenters and adding departments to the stores that Ralphs bought from Smith's Food & Drug Centers, Salt Lake City, earlier this year.
BlowOut has an exclusive arrangement with Ralphs, but not with Wal-Mart, which also has Blockbuster leased-space departments in some of its supercenters on a test basis. Rent is percentage-only of revenues with no base, according to an investment report by Pennsylvania Merchant Group, West Conshohocken, Pa. There is a revenue volume escape clause and the host store builds out the space, the report said.
Cost for opening the typical 1,000-square-foot department with 4,000 rental units is about $94,000, said the report. Revenues, the report added, break down as follows: video rentals 68%, previously viewed sales 18%, video game rentals 10%, new sell-through tapes 3% and other 1%.