The video chain Blockbuster blamed a fall in rentals on fiercer competition as it reported quarterly profits well below analysts' estimates yesterday, even before $1.5bn (£830m) in one-off charges.

The company also forecast there would be a significant fall in fourth-quarter earnings, with weakness continuing into 2005, and announced the resignation of the president and chief operating officer, Nigel Travis.

Blockbuster disclosed a $1.42bn net third-quarter loss, with large impairment charges prompted by Viacom's spinoff of the chain. Blockbuster shares fell 3.2% on the news. The company made a profit of $63.7m a year earlier.

Excluding charges, the latest quarter showed a profit of $3.4m, or 2 cents a share, well below the average analyst expectation of 11 cents a share compiled by Reuters Research.

Revenue rose 1.8% to $1.41bn as the weaker dollar boosted the dollar value of sales outside the US. Same-store rental revenue decreased 6.3%, the company said, citing weak demand and high television viewership for the summer Olympics.

Blockbuster has faced increasing competition from online video rental businesses such as Netflix, and Amazon.com is seen by analysts as poised to join the fray, which also includes Wal-Mart.

Blockbuster has launched its own online subscription rental service and has started letting customers trade in DVDs and games for store credit. The company has had to speed up investment in those initiatives, which is also cutting into profits.

The company expects the rental industry to continue to decline next year and stabilise by the end of 2005 as DVD penetration is projected to reach 70% of US households.