Blockbuster Inc. swung to a first-quarter profit as its Total Access online rental business turned profitable and its store sales and margins improved.

Trying to transform itself with or without its proposed acquisition of Circuit City Stores Inc., the Dallas-based movie rental chain said Thursday it's moving forward on projects.

This summer it plans a test in Dallas of a movie downloading kiosk from NCR Corp. that works with a companion portable viewer made by a manufacturer it hasn't yet disclosed.

It's launching an online movie downloading service with a library of more than 9,000 titles, by late June and introducing new in-store rental prices. Several concept store tests are under way in the Dallas area, including a store that sells electronics and another with a full-service beverage counter.

Blockbuster CEO Jim Keyes told investors that it will take a few weeks to complete its review of Circuit City and that the company won't proceed with its offer of up to $1.3 billion unless a deal makes sense.

In the quarter ended April 6, Blockbuster's expenses were $100 million lower than a year ago, and it posted its first same-store sales increase in five years. It reported net income of $45.4 million, or 20 cents a share, compared with a net loss of $49 million or 27 cents, in the year-ago period. Analysts' consensus estimate was for 15 cents a share and revenue of $1.44 billion.

Total revenue in the quarter fell by $79.8 million, or 5.4 percent, to $1.39 billion from a year ago, primarily due to the closure or sale of 412 company-operated stores worldwide, including the divestiture of the Gamestation chain in the U.K.

Same-store sales were up 2.9 percent, reflecting a 0.4 percent increase in rentals and a 19.7 percent increase in merchandise sales. Since he took over last summer, Mr. Keyes has stocked movie-related merchandise such as toys and posters while positioning DVDs for sale next to new releases for rent. It's also expanded its video gaming selection and now rents games for portable game players.

Blockbuster shareholders will be the first to see a demonstration of its new movie downloading kiosk at the annual meeting in New York on May 28. "We're ahead of both the technology and consumer a little bit," Mr. Keyes said of the idea, adding that it may be two to three years before it's widely used.

Blockbuster's shares ended Thursday down 2 cents to close at $3.05.