Movie Gallery

Movie Gallery Inc. (Dothan, Ala.), the nation’s second largest video retailer, today announced a 5.5 percent decrease in same-store revenues for the second quarter of 2005. Rentals fells 8.4 percent, though video sales gained 10.6 percent.

The newly acquired Hollywood Entertainment suffered a 4.4 percent drop in revenues. Existing Movie Gallery locations fell 8.1 percent.

“We were disappointed to see that our same-store revenues in both the rural and urban markets were adversely impacted by the weak home video release schedule,” said chairman, president and ceo Joe Malugen. “Coming into the quarter, we were internally forecasting our same-store revenues to be down slightly; however, for the month of June our same-store rental revenues were down 12 percent, which was significantly softer than anticipated. Although we have seen some improved trends over the past few weeks, we believe that the continuation of an unimpressive slate of titles will adversely impact our business in both the rural and urban markets during the third quarter.

“However, we do expect this trend to improve in the fourth quarter, reflecting a more favorable release schedule primarily in the $10-$50 million category,” he added. “The fourth quarter of 2005 should also benefit from popular titles in the $100+ million category such as ‘Batman Begins,’ ‘Star Wars Episode 3,’ ‘War of the Worlds,’ ‘The Island,’ ‘Mr. and Mrs. Smith’ and ‘Fantastic Four.’

“In addition, we are making excellent progress with the integration of both Hollywood and VHQ. At this early stage of the Hollywood merger, we are excited about, and pleased with the progress of consolidation of functions and operations, the migration of best practices between the two companies, and the synergies that stem from our combined buying power in the marketplace. This is a complex process, and we are committed to moving forward as quickly as possible, without taking our eyes off our core business.”

During the second quarter of 2005, the company successfully completed the acquisitions of both Hollywood Entertainment Corporation and VHQ Entertainment Inc. As a result of these acquisitions and new store openings, at quarter end, it had a total of 4710 stores throughout North America, with 4430 stores in the United States, 273 stores in Canada and 7 stores in Mexico. It said it currently expects that the combined company will open approximately 300 new stores in 2005.