Some Movie Gallery stores will close, Sauk City store will remain open
By Associated Press and Capital Newspapers
Movie Gallery, owner of the Hollywood Video movie rental chain, has filed for Chapter 11 protection and plans to close 805 stores — about a third of its total.
At least seven Madison-area Movie Gallery stores and two Hollywood Video stores will close due to the company's restructuring.
At local stores, employees referred calls to the corporate office, which referred inquiries to the company's Web site. According to the site, stores in Waunakee, DeForest, Verona, Stoughton, Mount Horeb, Milton and Juneau will close, as well as the Hollywood Video stores at 6500 Monona Drive in Monona and in Beloit.
All are having closing sales and no closing date was given by the company or store employees.
Area stores that remain open include Oregon, Fort Atkinson, Baraboo, Richland Center, Platteville, Sauk City and Monroe.
It's the second trip through bankruptcy court in just three years for Movie Gallery. The company is struggling with competition as more people choose to stream videos online from Netflix and other services.
The company, which is based in Wilsonville, Ore., first landed in bankruptcy court in October 2007, unable to sustain the debt it took on in its $850 million acquisition of rival Hollywood Entertainment Corp. in 2005. Movie Gallery agreed to assume about $350 million of Hollywood Entertainment's borrowings as a part of the deal.
The acquisition made Movie Gallery the No. 2 rental chain in the country behind Blockbuster. But it has been forced to close more than 2,400 of its stores in the past three years, leaving about 2,600 still open, according to court filings made Tuesday.
Despite moving to shut down unprofitable locations, the company said it continued to see "significant" losses in 2009. Annual revenue fell $546.3 million, or 28 percent, to $1.4 billion.
In a court filing in the U.S. Bankruptcy Court for the Eastern District of Virginia in Richmond, Movie Gallery chief restructuring officer Steve Moore said the company was facing "looming defaults" on its loan agreements.
The company listed debts of between $500 million and $1 billion, compared with assets of between $10 million and $50 million.
— State Journal reporter Jane Burns contributed to this article.