jrs
11-02-02, 12:35 PM
MOVIE GALLERY IS GROWING, COUNTRY-STYLE
Chain boasts that it has best operating margins in the biz.
By Paul Sweeting 11/1/2002
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NOV. 1 | NEW YORK--Movie Gallery is on track to have 1,735 stores open and operating by the end of 2002, giving it a 6% share of the video rental market, and the chain still sees plenty of room for growth.
"Our stores are primarily located in rural markets, and when we say rural we mean rural," CFO Steve Roy told investors at last week's conference sponsored by investment banking firm Gerard Klauer Mattison.
"We target towns with populations of 3,000 to 20,000," Roy said.
By Roy's estimate, there are still 4,000 markets in its target range in the U.S. and Canada without Movie Gallery locations.
"That's a significant growth opportunity for us," he said.
Dothan, Ala.-based Movie Gallery plans to add 150 to 170 more stores in 2003, Roy said, including new locations developed by the company and stores it acquires.
"We've acquired 575 stores in the past two years," Roy noted, including 324 Video Update locations, but most of the chain's acquisitions involve small operators with five stores or fewer.
According to chairman and CEO Joe Malugen, Movie Gallery is the lowest cost operator among the big chains in the video rental business and produces the best operating margins, albeit on a much smaller scale than Blockbuster Video and Hollywood Video.
"We generate an average of $340,000 in revenue per year, per store," Roy said.
In contrast, Hollywood generates about $800,000 per store, while Blockbuster averages slightly less than $1 million per store.
Aside from operating in smaller markets, Movie Gallery's stores are also smaller than those of its rivals.
Movie Gallery locations average 4,600 square feet, according to Roy, compared to 6,000 square feet for Blockbuster and 6,800 for Hollywood.
It costs Movie Gallery $135,000 to open a new store, including inventory, and generates about $300,000 in revenue to the first year and $340,000 in the second.
The chain engages in revenue sharing for DVD with three studios, Roy said, without identifying them. "We could do more, but the deal would have to offer us better economics than we get now from DVD," he said.
"We might also do it if a particular studio wanted to gain market share with Movie Gallery vis-à-vis another studio."
Part of Movie Gallery's success is the higher per-household spending on home video in its markets than in larger markets, Roy said.
"In our towns on the weekend, you can pretty much go to the high school football game, hang around at the coffee shop or rent a movie," Roy said. "It's not flashy folks, but it's a good business."
:D
Chain boasts that it has best operating margins in the biz.
By Paul Sweeting 11/1/2002
--------------------------------------------------------------------------------
NOV. 1 | NEW YORK--Movie Gallery is on track to have 1,735 stores open and operating by the end of 2002, giving it a 6% share of the video rental market, and the chain still sees plenty of room for growth.
"Our stores are primarily located in rural markets, and when we say rural we mean rural," CFO Steve Roy told investors at last week's conference sponsored by investment banking firm Gerard Klauer Mattison.
"We target towns with populations of 3,000 to 20,000," Roy said.
By Roy's estimate, there are still 4,000 markets in its target range in the U.S. and Canada without Movie Gallery locations.
"That's a significant growth opportunity for us," he said.
Dothan, Ala.-based Movie Gallery plans to add 150 to 170 more stores in 2003, Roy said, including new locations developed by the company and stores it acquires.
"We've acquired 575 stores in the past two years," Roy noted, including 324 Video Update locations, but most of the chain's acquisitions involve small operators with five stores or fewer.
According to chairman and CEO Joe Malugen, Movie Gallery is the lowest cost operator among the big chains in the video rental business and produces the best operating margins, albeit on a much smaller scale than Blockbuster Video and Hollywood Video.
"We generate an average of $340,000 in revenue per year, per store," Roy said.
In contrast, Hollywood generates about $800,000 per store, while Blockbuster averages slightly less than $1 million per store.
Aside from operating in smaller markets, Movie Gallery's stores are also smaller than those of its rivals.
Movie Gallery locations average 4,600 square feet, according to Roy, compared to 6,000 square feet for Blockbuster and 6,800 for Hollywood.
It costs Movie Gallery $135,000 to open a new store, including inventory, and generates about $300,000 in revenue to the first year and $340,000 in the second.
The chain engages in revenue sharing for DVD with three studios, Roy said, without identifying them. "We could do more, but the deal would have to offer us better economics than we get now from DVD," he said.
"We might also do it if a particular studio wanted to gain market share with Movie Gallery vis-à-vis another studio."
Part of Movie Gallery's success is the higher per-household spending on home video in its markets than in larger markets, Roy said.
"In our towns on the weekend, you can pretty much go to the high school football game, hang around at the coffee shop or rent a movie," Roy said. "It's not flashy folks, but it's a good business."
:D