Hollywood's 2nd round of store closures

[IVR]

Gallery Seeks $1M for New Store Closures
Author: ERIK GRUENWEDEL
egruenwedel@questex.com
Posted: January 22, 2008
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Bankrupt Movie Gallery Inc. has requested authorization for funds of about $1 million to compensate employees and managers in a new round of store closures.
Gallery, which filed for Chapter 11 bankruptcy protection last October, shuttered about 520 locations prior to and following the filing.

The motion, filed Jan. 18 with U.S. Bankruptcy Court of Virginia in Richmond, is based on an undisclosed number of additional (Phase II) closures of underperforming stores.
Gallery claimed liquidation and closure “performance bonuses” were not likely to exceed $1,200 per store based on going-out-of-business sales during Phase I that lasted from three to seven weeks.

Affected hourly staffers would be entitled to no more than $1 per hour in additional compensation, with store managers capped at $100 per week; and district managers eligible for no more than $2,000 in bonus pay.

Gallery estimated severance payments for individual district managers would not exceed $5,000 to $10,000.

As of Dec. 2, 2007, Gallery employed 6,800 full-time and 31,600 part-time employees at more than 3,600 locations.

[NetflixInvestor]

The court order for this came at the tail end of last Friday: http://www.kccllc.net/documents/0733...0000000023.pdf

I suspect it was why Blockbuster's stock held up well in the market yesterday.

Movie Gallery has been making motions to streamline the process for some time but this was the first reference to 'Phase II closures'. Given that we are now on the descending side of seasonality, underperforming stores become a burden again.

I would predict that the announcement comes soon after the Jan 29th omnibus meeting.

[whorehoppin]

I don't know if my store can handle this. We've already had 2 nearby Hollywood stores close and there's still 2 more and one Movie Gallery within 20 minutes...if any of those close, we'll have too many customers.

No, I'd love to have all of their customers...we'd just need a couple cases of member apps since we run out every week.

[Woodstock]

Originally Posted by whorehoppin

I don't know if my store can handle this. We've already had 2 nearby Hollywood stores close and there's still 2 more and one Movie Gallery within 20 minutes...if any of those close, we'll have too many customers.

No, I'd love to have all of their customers...we'd just need a couple cases of member apps since we run out every week.

What you might want to do is photo copy a member app and shrink it so that it will all fit on one 8x10 page.

[NetflixInvestor]

They pushed the meeting to Feb 5th FYI.

[NetflixInvestor]

The court gave them clearance on the motion to pay bonuses today.

http://www.kccllc.net/documents/0733...0000000005.pdf

It's not clear to me at this point what stands in the way of closing those stores.

[Added below]
Apparently they've also been given a 90 day extension to determine which leases to reject. I suspect this is why the stock has underperformed. Without the extension they would have had to decide by Feb 13th, now they get to May 13th.

http://www.kccllc.net/documents/0733...0000000006.pdf

I still stick to the theory that the strong seasonal business in Dec/Jan/Feb? keeps them from closing stores that would otherwise be unprofitable on a full-year basis. These stores should grow unprofitable again before the weakest months in the summer. The pullback on Total Access may have helped them as well.

On Feb 5th, they will seek approval for the restructuring plan which I suspect will go through since all the major creditors seem to be on board already.

[NetflixInvestor]

Looks like about 77 stores got canned..

http://www.kccllc.net/documents/0733...0000000006.pdf

Kind of a disappointing figure, but they could do this again next week as far as I am aware, and the week after... etc.

The only reason I see for doing it all at once would be to allay fears of the remaining employees. Aside from that, it's more logical to start from the weakest stores, and roll upwards over time.

[Clarification]
I think these stores were already closed at some point in the past, as there is a seperate filing claiming the abandonment of minimal assets left on site. The stores are already stripped from the store locator function on the website.

[Youdontknowme]

No stores near me, but every little bit leads to the eventual closure/buy out of all of them.

[OzMan]

More HV than MG, and some locatings I recognise (ie, have competed against, or know people who competed against them)

[IVR]

Originally Posted by NetflixInvestor

Looks like about 77 stores got canned..

http://www.kccllc.net/documents/0733...0000000006.pdf

Kind of a disappointing figure, but they could do this again next week as far as I am aware, and the week after... etc.

The only reason I see for doing it all at once would be to allay fears of the remaining employees. Aside from that, it's more logical to start from the weakest stores, and roll upwards over time.

[Clarification]
I think these stores were already closed at some point in the past, as there is a seperate filing claiming the abandonment of minimal assets left on site. The stores are already stripped from the store locator function on the website.

Some of these are Hollywood Video Kiosks