The Donthan, AL movie chain said it lost $14.9 million, or 47 cents a share, in the second quarter ending June 2, compared to a loss of $12.2 million, or 39 cents a share, during the same period a year earlier. Revenue was up 19% to $601.3 million from $504.7 million in the second quarter of 2005 but comparative store sales dropped 4.6% due to a slowdown in video rentals
The company, which took on $1.25 billion in debt last year after acquiring Hollywood Entertainment, has been struggling with competition from rivals Blockbuster and Netflix and weak consumer demand for its lineup of movies.
In a bid to shore up its weakened finances, Movie Gallary officials said they have hired Merrill Lynch to advise the firm on ways to improve its capital structure and will employ Alvarez & Marsal to assist in further streamlining operations.
Although firm officials declined to comment on the restructuring, Thomas D. Johnson, Jr., interim chief financial officer said in a conference call that the company is "encouraged by the range of possibilities now under review."
Among the changes in store for North America's second largest home entertainment specialty retailer will be the reduction in the number of stores the company now operates. Movie Gallery, which currently has 4,700 stores in the U.S., Mexico and Canada, will cut a total of 175 underperforming and overlapping stores from its lineup by the end of the year, said J. T. Malugen, the firm's chairman, president and chief executive officer. In the second quarter, 42 stores overlapping stores were closed and 380 salaried and administrative staff members were cut from the payroll.
Malugen said the firm also is in the process of restructuring the leases on 1,100 Movie Gallery and Hollywood Video stores and will restructure 70% of the company's real estate portfolio to further reduce costs.
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