Gallery to Close 520 Stores25 Sep, 2007 By: Chris Tribbey
Beleaguered movie rental chain Movie Gallery Inc. announced Sept. 25 it would close 520 “underperforming and unprofitable” Movie Gallery and Hollywood Video stores, another piece of bad news for a company that saw its credit rating cut a week earlier.
“Closing these stores was a difficult but necessary decision to protect the future of this company,” said Joe Malugen, chairman, president and CEO of Movie Gallery. “These stores are being closed after evaluating a number of factors, including store profits and the terms of the leases at each location.
“This action will allow us to focus our resources on the approximate 4,000 stores that have a stronger operating performance and prospects for future growth.”
While no numbers of affected employees were revealed by Movie Gallery, a press release stated that Movie Gallery was “committed to treating all affected employees fairly and providing the necessary assistance to make this transition as smooth as possible.”
Great American Group, an outside professional services firm, has been retained to help sell off inventory at the closing stores. Customers with accounts at the closing stores may be able to have their accounts transferred to another Hollywood Video or Movie Gallery store, where possible.
The Dothan, Ala.-based Movie Gallery had its credit rating dropped to junk “D” status earlier in September after failing to meet a deadline to pay off interest for a second-lien term loan. The company's forbearance agreement extension with its lenders expires at the end of the month.