Movie Gallery closes 400 more stores

By Cindy Spielvogel -- Video Business, 2/5/2008

FEB. 5 | Gallery is closing 400 more stores.

The announcement had been expected; Movie Gallery had asked permission from the U.S. bankruptcy court to pay incentives to employees to help close stores.

In that motion, Movie Gallery said its current store total is 3,640.

The company, which filed for chapter 11 bankruptcy in October, stated in a Feb. 5 Securities and Exchange Commission filing that the closings are necessary, “due to continued weakness in the company’s industry, to conserve cash and reduce the company’s overall cost structure.”

Locations scheduled for closure include more than 220 Hollywood Video and more than 170 Movie Gallery stores throughout the country, representing about $126 million in annual sales.

The company expects to have the stores’ inventory sold by the end of March.

The closings are a second phase of widespread closure of underperforming and unprofitable stores for the financially struggling video rental company.

The first phase began in September, when Movie Gallery announced the closing of 520 stores.

Liquidation of those stores amounted to sale revenue of $28.6 million and sales-related expenses of $17.9 million, according to the SEC filing.

Store landlords have filed various objections related to the continued closings, but the judge so far has largely ruled in Movie Gallery’s favor.

Objections to the store closing process were made during the first phase, but Movie Gallery was able to work out those problems.