Blockbuster Entertainment ended 2005 with fewer stores than it started with, a reversal in a long-time growth trend that will continue into 2006 and beyond. The 4,617-store chain shed about 80 stores in 2005 while reporting a net loss of $588 million, down from $1.25 billion in 2004. But the retailer managed to generate net income of $18 million in the fourth quarter despite a 10.1% decline in same-store sales. The chain attributed the bulk of its 2005 losses to its decision to eliminate late fees.

Looking forward, Blockbuster expects to close up to 150 stores in 2006. During a March 9 conference call, Blockbuster ceo John Antioco said he expects "significant capacity shrinkage over the next couple. of years" as the chain ad justs to a changing market.

One area Blockbuster expects to grow is online rentals. It currently has 1.2 million subscribers for Blockbuster Online and hopes to increase its membership to 2 million by the end of 2006 with a new marketing campaign.