NEW YORK — Movie Gallery Inc. told Wall Street analysts it will report a loss for its second fiscal quarter ended July 6 of 6¢-9¢ a share because of lower-than-expected rental revenue and increased amortization of videocassette rental inventory.
Revenue of stores open more than a year — also known as same-store sales — …..is expected to be down about 2% from the 1996 second quarter. The video specialty store will announce its 1997 second-quarter results Aug. 15.
“Movie Gallery has continued to be negatively affected by the general weakness in the video specialty store industry and by increased competition in our more urban locations,” said J.T. Malugen, chairman and chief executive officer of the Dothan, Ala., chain. “We have responded to this increased competition by taking steps to maintain and build market share in key markets in spite of the short-term pressures these steps impose on our profitability.”
During the first and second quarters, the company increased its rental inventory purchases of hit titles to provide customers with greater new-release availability. This strategy resulted in increased amortization of videocassette rental inventory, which lowered profit margins.
Movie Gallery is the second-largest video specialty retailer in the U.S. in terms of outlets, with 865 stores and 106 franchisees, and licensees located in 22 states.