DALLAS-Blockbuster’s upcoming fourth quarter report will show a big jump in same-store sales despite a drop in rentals, the locally headquartered company revealed Thursday. Domestic sales increased 4.4% in the final three months of 2008 for the 7,500-store chain, up from a decline of 0.9% in the same year-earlier period.

Blockbuster will report complete year-end results on March 19. Its earnings preview comes two days after it hired Kirkland and Ellis LLP “for assistance with ongoing financing and capital-raising initiatives,” causing some to speculate about a bankruptcy filing, which pushed the company’s share price down despite a denial by Blockbuster.

“In 2008 we executed on our key initiatives to grow the core rental business, enhance our retail offering and develop digital delivery channels,” Jim Keyes, Chairman and CEO of Blockbuster, said in a prepared statement. “With respect to our financing initiatives, we continue to work diligently to resolve the August 2009 debt maturities, aggressively reduce costs and maximize the company’s strong cash flow generation.”

The increase in same-store sales was comprised of a 2.6% decrease in domestic same-store rental comparables and a 36.5% increase in domestic same-store retail comparables, which means the results were largely driven by increased sales of games, game merchandise and consumer electronics.

Blockbuster offers movies, as well as video games for in-store rental, sale, and trade, and also sells other entertainment-related merchandise and rents movies over the Internet. For the full year of 2008, Blockbuster achieved a 6.4% increase in domestic same-store sales, compared to a decrease of 6.9% in 2007. Similar to the fourth quarter, a 1.2% decrease in same-store rental comps was more than offset by a 37.4% increase in same-store retail comparables.

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