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Movie Gallery Ups Revenue Nearly 50 Percent

6 Aug, 2002 By: Joan Villa

With 510 additional stores under its belt, Movie Gallery boosted second-quarter revenue nearly 48 percent to $122.6 million on 1.3 percent higher same-store sales over the year-ago period.

Going forward, the nation's No. 3 rental chain expects flat to 2 percent same-store sales increases in the third quarter, but raised full-year 2002 pro forma earnings targets to $1.15 to $1.21 per share from the previous range of $1.08 to $1.16. Net income for the quarter ended July 7 was $5.6 million, or 18 cents per diluted share, up from the year-ago equivalent profit of $1.8 million, or 7 cents per share.

With DVD now representing 27 percent of rental revenue, up from 24 percent in the first quarter, CEO and chairman Joe Malugen said the chain just signed its third DVD revenue-sharing pact that allows flexible purchases between VHS and DVD formats but preserves the high margins of DVD sellthrough pricing.

“We're creating some relationships with studios that are more a partnership and we think that's were we need to be long term,” Malugen explained.

Revenue-sharing deals that include DVD generally return 20 percent to 45 percent of rental revenue back to the studio, he said. However, they eliminate the temptation to buy higher ratios of DVD to VHS simply because DVD is sellthrough-priced but only 30 percent of the market, added EVP and CFO J. Steven Roy.

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