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Movie Gallery Q4 Profit Drops 35 Percent

18 Mar, 2005 By: Erik Gruenwedel

Citing a dearth of $100 million box office home video releases and a 21.4 percent drop in sellthrough, among other concerns, Movie Gallery reported a 35 percent drop in fourth quarter (ended Jan. 2) profit, to $11.3 million, or 36 cents per diluted share, compared to $17.4 million, or 52 cents per diluted share, during the same period last year.

Revenue for Dothan, Ala.-based Movie Gallery — driven largely by a 15.6 percent increase in the average number of stores operated — was up 6.6 percent, to $208.4 million, compared to $195.5 million last year.

Same-store revenue, however, dropped 6 percent from the same period last year.

In addition to non-cash charges related to changes in accounting for improvements to store locations, Gallery reported a $500,000 equity loss, or 2 cents per diluted share, for investments in nondisclosed alternative delivery methods some experts say probably included the Internet or video on demand.

Gallery remains confident that its $13.25-per-share offer for Hollywood Video — approved by a special committee of Hollywood's board of directors — will come to fruition.

Hollywood shareholders also have been offered $14.50 per share in a hostile bid from No. 1 Blockbuster — a tender that has been challenged by the Federal Trade Commission.

“[Gallery] should be confident,” said retail analyst Dennis McAlpine with McAlpine Associates, Scarsdale, N.Y. “If you allow Hollywood and Blockbuster to merge, you might as well throw out your antitrust laws.”

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