Movie Gallery to Close All Stores By July, Staffers Say

Battered by competition from Netflix, Redbox and the emergence of new video streaming, Movie Gallery by early July will close the more than 1,900 stores that remain in the chain, store staffers told us Monday. The chain, which in February filed for bankruptcy for the second time in three years, told employees that all stores will close 10 weeks from Wednesday, a store manager said: “We just decided to shut down rather than keep closing stores.” The chain’s Portland, Ore., headquarters didn’t respond right away to requests for comment.

Some outlets in the Richmond, Va., area began close-out sales five weeks ago, a store manager there said. A Hollywood Video store in Middletown, Conn., is scheduled to close Sunday, a manager there said. Movie Gallery had 1,111 stores under its own name, 545 Hollywood Video and 250 Game Crazy outlets. The chain suffered from a “large number of stores” with negative cash flow, the chain said in its bankruptcy filing.

It had 19,082 employees when it filed for bankruptcy, including 3,970 full-time and 15,112 part-time, the company said. Movie Gallery posted $1.4 billion in sales in 2009, 52 percent from DVD rentals and 21 percent from the sale of new and used videogames. With the competition, Movie Gallery was hit with reduced store traffic along with “downward pressure” on pricing that narrowed operating margins, chain said in court documents.

Movie Gallery, the second largest rental chain behind Blockbuster, failed to rebound after emerging from bankruptcy protection the first time in 2008. Many trace the start of the chain’s downfall to its 2005 acquisition of the debt-laden, 2,000-store Hollywood Entertainment chain. When it filed for bankruptcy in February, Movie Gallery listed about $600 million in debt.