Former 7-Eleven CEO Faces a Sequel

DALLAS -- So far, the revitalization of Blockbuster Inc. has proved challenging for new chairman and CEO Jim Keyes, whom with 7-Eleven, helped the convenience store chain post 36 consecutive quarters of same-store sales growth, Barron's reported.

Shares of the movie-rental giant have fallen 47 percent from their 52-week high last March. And the stock is off 9.5 percent since July when Blockbuster hired Keyes as its new chief executive officer to reignite the business, the report stated.

Those bullish on Blockbuster, though, say the Dallas-based company deserves a fresh look, as it refocuses on its 7,800 retail stores and deemphasizes a once-promising strategy of morphing into a purveyor of movies by mail, like Netflix. It's believed Blockbuster could rediscover its 2004 earnings peak by raising prices for its DVD-by-mail programs, reinstituting some form of late fee, and paring back on inefficient advertising expenses.

Recently, the company announced price increases for its Total Access subscribers, a move that resonated with investors, who sent shares up based on the news.

Like his time at 7-Eleven, Keyes is now hoping to fix another global brand on his way to finding new opportunities for the company. Keyes was traveling and unable to comment for the Barron's story, according to a Blockbuster spokeswoman.

Ed Moneypenny, who served as 7-Eleven's chief financial officer from 2002 to 2006, told Barron's that he credits Keyes with expanding 7-Eleven's customer base and driving sales growth despite a seemingly full-grown business. Keyes was able to grow sales through innovations like fresh food and sugar-free Slurpees, Moneypenny said.

At Blockbuster, Keyes inherits a similarly mature business in need of a fresh approach. The CEO is talking about new ideas for Blockbuster stores, such as the installation of digital download kiosks (that would ensure movies never go out of stock), and the sale of Sony's PlayStation 3 game console, according to the news report.

Investors have responded skeptically, but Wedbush Morgan analyst Michael Pachter said the company's fourth-quarter results are likely to benefit from Keyes' latest improvements, as well as a historically strong time of year for DVD purchases and rentals.

Keyes' time at 7-Eleven offers some optimism. Much like at Blockbuster, shares of the convenience store chain lost significant value in Keyes' first months as CEO. However, over the next five years, 7-Eleven gained over 350 percent, culminating in a buyout by the company's Japanese affiliate in 2005, Barron's reported, adding that investors in Blockbuster would be content if Keyes could pull off an encore.

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