As movie rental company Movie Gallery
What analysts say:
- Buy, sell, or waffle? Not much is playing at the Wall Street multiplex. Five of the six analysts covering Movie Gallery say "hold," while one says "sell."
- Revenues. Revenues are forecast to drop 2% to $664.1 million.
- Earnings. Comparing year-over-year changes in profits is probably not meaningful, since the company reported huge one-time expenses last year, resulting in losses of more than $17 per share. For this quarter, analysts actually expect a profit of $0.25 per share on average, but they range from a $0.95 loss to a $1.15 gain.
What management says:
You can rent a movie just about anywhere these days, but apparently, not too many people are interested in getting one from Movie Gallery. Lost in the battle between Netflix's
That's been hard, and mounting losses haven't made it any easier. Movie Gallery's acquisition of MovieBeam may be a chance to break out from the deterioration witnessed in its storefront operations, but it seems a bit of a gamble, and it entails a lot of risk. The set-top box model looks like it might be a hard sell.
What management does:
At the end of last month, Movie Gallery released preliminary figures for the fourth quarter, showing that its situation was not improving. Same-store sales were down 32%, while comparable revenues were flat at its Movie Gallery outlets and down 4% at Hollywood Video. Although it's experiencing operational difficulties of its own making, Movie Gallery is also hampered by lackluster movie releases. When studios release few blockbuster movies, the resulting doldrums trickle down to the rental companies.
|
10/05 |
01/06 |
04/06 |
07/06 |
10/06 |
|
|---|---|---|---|---|---|
|
Gross |
64.2% |
61.0% |
60.6% |
60.5% |
60.2% |
|
Operating |
4.4% |
3.1% |
4.1% |
4.1% |
3.7% |
|
Net |
0.3% |
(27.8%) |
(21.7%) |
(21.0%) |
(21.8%) |
One Fool says:
Movies, movies everywhere, but customers are still hard to come by at Movie Gallery. Underscoring just how irrelevant Movie Gallery is becoming, it continues to close down stores and pursue leasing arrangements for unused space at remaining ones. That doesn't seem to be a winning combination, when you can just as easily rent current hits at McDonald's
With smaller footprints leading to smaller sales -- even if Movie Gallery will generate income from the leased space -- investors can hardly conclude that this company deserves their dollars. MovieBeam may not turn out to be the godsend the company desperately needs. Movie Gallery won the battle but lost the war in its acquisition of Hollywood Video, and although MovieBeam was cheap by comparison, it could be yet another of the Quixotic ventures that hubris demands some companies undertake.
Fade in on further Foolishness:
- It's in the Box, Movie Gallery
- Movie Gallery's Temporary Reprieve
- Movie Gallery Fades to Red
- Foolish Fundamentals: Margins
Movie Gallery has earned a one-star rating from Motley Fool CAPS, the new investor intelligence community. You can add your voice to the new stock rating service by joining today. It's free!
A 30-day trial subscription gives you inside access to understanding why Netflix is a recommendation of Motley Fool Stock Advisor, but Movie Gallery and Blockbuster aren't. Start your free trial today! Coinstar is a recommendation of Motley Fool Hidden Gems.
Fool contributor Rich Duprey does not own any of the stocks mentioned in this article, though he does rent movies two at a time from Netflix. You can see his holdings here. The Motley Fool has a disclosure policy.
