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Movie Gallery Looks for Lower Comp Sales in Q3 and Q4

15 Sep, 2005 By: Holly J. Wagner

Movie Gallery is expecting an 8 percent to 10 percent drop in same-store revenue for the third quarter compared to last year's third quarter and a smaller drop-off for the fourth quarter, even though executives expect the company to net $20 million in savings this year from the Hollywood Entertainment acquisition, executives said today.

Once again, the box office slump got the blame. Although the company forecast calls for an uptick from the third to the fourth quarter “as some of the year's biggest titles and likely best sellers are due for video release, the cumulative weakness of releases in the second and third quarters is expected to impact the fourth-quarter results,” according to a statement. The company expects same-store sales to be flat to down 6 percent as compared to the fourth quarter of 2004.

Executives are happy with the progress of integrating Movie Gallery with Hollywood Video, taking advantage of both companies' best practices, such as Hollywood's purchasing practices and distribution capabilities. Executives are chasing better long-term margins.

“I am very pleased with how well the integration of the two companies is proceeding and with the significant progress we have already made,” said chairman and CEO Joe Malugen. “The acquisition of Hollywood was a critical next step in Movie Gallery's growth strategy, and we believe it has created a stronger combined company.”

Executives hope to realize increased savings of about $50 million by the end of 2007, largely from the optimization of its new sellthrough inventory and the consolidation of real estate and construction, distribution, and executive management functions as well as other G&A expense reduction opportunities. But not all savings will show up in the company's earnings per share, executives noted.

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