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Movie Gallery Cutting 100 Jobs

The company cites a weak box office.
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Movie Gallery


said it would cut 100 jobs, or 10% of its workforce, as a box office slump continues to hammer earnings.

The Dothan, Ala., movie rental firm said it would consolidate back-office operations at its Portland, Ore., office in the wake of April's acquisition of Hollywood Entertainment. The job cuts come on top of 80 jobs already eliminated in recent months, mostly in Portland.

"Over the past few months we have taken significant steps to position the company for future growth," said CEO Joe Malugen. "In spite of our market and operational strengths, our industry continues to face significant challenges, including the worst box office slump in more than two decades. While we are hopeful that the fourth quarter will begin to show some improvement due to the release to video of several box office hits, the profound softness in our market requires us to take a hard look at our cost structure."

"The process of merging Movie Gallery and Hollywood Entertainment has led us to conduct a comprehensive organizational review and has laid the groundwork to address the challenges that we currently face," Malugen said. "Accordingly, we will continue the consolidation of certain corporate departments by locating the primary functions of finance, accounting, treasury, product, logistics, human resources and payroll at our Portland office."

Beginning in the fourth quarter of 2006, the company expects to see annualized pretax savings of $2.1 million, which will advance its goal of achieving about $50 million in cash savings by the end of 2007. To realize these cash savings, Movie Gallery will incur after-tax costs of roughly $1.1 million for severance and other expenses during 2005 and 2006.

On Tuesday, shares of Movie Gallery fell 5 cents to $7.55.