Movie Gallery (MOVI), parent company of Hollywood Entertainment, reported that its first-quarter income more than doubled from the same period last year. At the same time the company is putting out feelers hinting that they would like to participate in a merger with Blockbuster Inc. (BBI), the industry leader.
Thomas Johnson, Movie Gallery's senior vice president of investor relations, said in an earnings call Thursday "I think we would be very receptive to something of that magnitude, we're going to do whatever makes sense to create the most value for our shareholders."
Movie Gallery's net income increased to $40.3 million, or $1.27 a share, for the first quarter ended April 2, from $18.4 million, or 58 cents a share, from the same period a year ago.
They reported that sales were $694.4 million for the first quarter, almost 3 times its total of $223.8 million in 2005's first quarter.
The real story is not that sales increased from buying Hollywood Entertainment, but that same-store sales in the first quarter dropped by 6.5 percent. This figure is based upon stores that have been open at least a year as of April 2.
Joe Malugen, Movie Gallery's chief executive, commented in Thursday's call that the soon coming new video game consoles along with high-definition DVDs should spur the company's business.
That last thought may be wishful thinking. I'm not so sure that HD DVDs are going to be that big of a hit. A lot will depend upon pricing and whether consumers think that the quality justifies it. The game consoles will help some, but again, some of them are struggling in sales also.
To me they need to think of new products and services outside of what they currently offer that will create new revenue streams. Otherwise they may be in for a continuous, slow decline.
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