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Movie Gallery Shutting Down All Stores

1 May, 2010 By: Erik Gruenwedel

Bankrupt Movie Gallery, owner of Hollywood Video, will begin shutting down operations in about two weeks, followed by a nationwide liquidation sale, sources familiar with the chain said.

Store personnel at a Hollywood Video in Chino, Calif., confirmed the pending closure, saying the store had been notified April 30 that business would remain as usual for the next two weeks, followed by a two-day closing and then liquidation.

A manager at a Hollywood Video in Riverside, Calif., said liquidation would last anywhere from six to 10 weeks.

“I have mixed feelings about this,” he said. “What can you do?”

Gallery and Hollywood Video locations in Alabama, South Carolina, North Carolina and Oregon also confirmed the pending shut down, according to a report by The Birmingham News.

Gallery, when originally co-founded by Joe Malugen in 1985, was based in Dothan, Ala.

It wasn’t immediately clear if the closure affects Gallery operations in Canada, which are not part of the bankruptcy filing.

Wilsonville, Ore.-based Gallery, in a recording, declined comment.

“This is very good news for Netflix, Redbox, Blockbuster and GameStop, in that order,” said Edward Woo, media analyst with Wedbush Morgan Securities in Los Angeles.

Gallery filed for Chapter 11 bankruptcy protection Feb. 3 for the second time, citing liabilities in excess of $540 million and domestic store base of 2,600 locations. At the time, Gallery, Hollywood Video and in-store Game Crazy locations employed more than 19,000 full-and-part-time workers.

The chain lagged significantly behind competitors Blockbuster, Netflix and Redbox without download, mobile, by-mail or kiosk operations in place.

Facing shutdowns of nearly half its stores after the bankruptcy filing, in addition to mountains of debt, Gallery had scant financial resources to transform itself in the rapidly changing home entertainment industry.

Gallery posted a combined operating loss of $7.9 million for the period from Feb. 3 through March 7, according to a filing with U.S. bankruptcy court in Richmond, Va.


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