Can the video rental industry get any uglier? Last night, Movie Gallery
That last point stings, because just last month the company projected a rebound in the fourth quarter. That was based on the anticipated video releases of some of the year's biggest theatrical blockbusters, like Star Wars Episode 3, War of the Worlds, Batman Begins and Marvel's
Movie Gallery posted a 6% slide in fourth-quarter comps in 2004, so the combination of hit movies and a sandbagged period to compare against should have led the company to close out the 2005 year strongly, in the hope of clinching its seventh consecutive year of record results.
It doesn't look good right now. The company is reporting progress in realizing synergies after its recent Hollywood Entertainment acquisition. But shaving overhead by eliminating redundancies won't alleviate the continuing trend of consumers bailing on movie rentals through traditional storefronts. As companies like Movie Gallery and Blockbuster
This doesn't mean that Movie Gallery's salvation would come from an online migration. Even Wal-Mart
Either way, swallowing the Hollywood Video chain isn't looking like such a great idea in retrospect. Realized savings in a sinking industry is never a fair trade.
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Longtime Fool contributor Rick Munarriz lives in South Florida, the original nesting ground for Blockbuster. He also owns shares in Netflix. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.