DOTHAN, Ala. - Video rental chain Movie Gallery has announced plans to close 400 "underperforming and unprofitable" stores as part of its restructuring under Chapter 11 bankruptcy law.
"The decision to close stores is always difficult, but we are confident that we are taking the right steps to emerge from bankruptcy as a stronger company," said chief executive Joe Malugen. "We have made significant progress in restructuring Movie Gallery and this action will allow us to further focus our resources on those stores with the strongest operating performance and best prospects for future growth."
The stores slated for closure include Movie Gallery and Hollywood Video outlets across the country. The company will work with customers of the affected stores to transfer accounts to nearby locations.
Movie Gallery filed for Chapter 11 protection in October in the United States Bankruptcy Court in the Eastern District of Virginia. The company has now asked the court for permission to pay employees an incentive to expedite the additional store closings.
The company closed 520 of its stores last fall. The additional closures will leave the chain with approximately 3,500 locations. A statement from Movie Gallery points to "continued weakness in the company's industry" as a factor in the decision, which was made "to conserve cash and reduce the company's overall cost structure."
Movie Gallery became the nation's second-largest video rental chain with the $1.2 billion purchase of Hollywood Video in 2005. The current reorganization will turn the company over to one of its lenders, Sopris Capital Advisors LLC.