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Movie Gallery To Restructure

DONTHAN, AL-Home video rental chain Movie Gallery has hired two firms to help restructure the company after the firm posted a $14.9 loss.

By Beverly Ford | Updated on August 11, 2006

DONTHAN, AL-Competition from Blockbuster and online movie renter Netflix along with heavy debt from the acquisition of a rival firm caused profits to drop significantly for film rental chain Movie Gallery, prompting the company to hire Merrill Lynch & Co. and turnaround specialists Alvarez & Marsal to help bolster the company’s finances.

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.

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