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UPDATE: Movie Gallery Reports 2nd Quarter Will Beat Estimates

13 Jul, 2001 By: Joan Villa

Boosted by stronger-than-expected store traffic in May and June and the growing popularity of DVD, Movie Gallery says it will report second quarter earnings of 21 cents to 23 cents per diluted share before one-time charges.

The earnings beat Wall Street expectations of 20 cents per share and compare to 17 cents for second quarter 2000, when fewer shares of Movie Gallery stock were trading. The company expects adjusted earnings before interest, taxes, depreciation and amortization to grow 30% versus the prior-year quarter.

Same-store sales for the first half declined 1.4% — a better showing than the retailer had expected — due to tough comparisons with an8.5% gain in same-store sales in the second quarter of 2000.

“We were very encouraged by stronger-than-expected traffic in May and June, attributable in part to the growing popularity of DVD andfavorable weather across many of our markets,” explained chairman and c.e.o. Joe Malugen in a statement. “We continue to expect to producepositive same-store sales performance for the second half of 2001.”

The 1,050-store chain has also completed a new three-year, $65 million debt facility led by SouthTrust Bank that will replace an existing facility set to expire in December.

The company’s shares were up $1.74, or 8.7%, to $21.69 on the second quarter earnings news.

Research director Greg Durkin at Alexander & Associates says that Movie Gallery’s recent stock-price climb from approximately $4 per share inFebruary is due in part to investors fleeing the technology sector in favor of businesses that demonstrate cash flow and profits. “Home video is a safe and recession-proof entertainment option,” Durkin says.

The Dothan, Ala.-based chain will report actual earnings July 25.

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