Wilsonville-based Movie Gallery succumbed to mounting financial losses last week, as the company filed for Chapter 11 bankruptcy protection for the second time in three years.

Movie Gallery is the second-largest rental chain in North America, and is now set to shut the doors of at least 760 Movie Gallery, Hollywood Video and GameCrazy stores in the United States alone, representing close to one-third of its 2,415 locations internationally. It remains unclear what will become of the company’s over 19,000 employees, but many likely will be laid off as part of the restructuring.
Calls to Movie Gallery were not returned, but the company posted a press release and public statement describing the bankruptcy filing on it’s Web site, www.moviegallery.com, and listing the stores that will be closed in coming weeks. 

These include Movie Gallery and Hollywood Video stores in Canby, Lake Oswego and Newberg, Hillsboro and Portland. Movie Gallery and Hollywood Video stores in Wilsonville and Tualatin will remain open. GameCrazy in Wilsonville also will remain open at present. 

According to the company, this is only the beginning of moves designed to enable the company to survive and become profitable once again.

“There will be further store closures, but we cannot speculate on the exact number,” Movie Gallery said in a press release issued Tuesday, Feb. 2. “We are closing these (stores) because they are not profitable and because funds from liquidating them can help us moving forward.” 

The company emerged from bankruptcy in 2008 after closing over 1,000 stores, reducing debt and renegotiating contracts with movie studios. The company has faced stiffening competition from online vendor Netflix, as well as market-leading Blockbuster. 

The company reportedly listed debs of between $500 million and $1 billion and assests of no more than $50 million in Chapter 11 documents filed this week in U.S. Bankruptcy Court for the Eastern District of Virginia. 

According to the Portland Business Journal, Movie Gallery cites in its bankruptcy petition ongoing economic and competitive realities facing its business as reasons for the move. 

he company says it filed for bankruptcy after falling behind on bills and risking a technical default on its loan payments when 2009 revenue fell to $1.4 billion from $2 billion in 2008. It posted a fourth quarter operating loss of $129.3 million, against an $84.8 million operating loss in the same quarter of 2008.

Prior to its acquisition in 2005, Hollywood Entertainment Inc. was one of Oregon’s few Fortune 1000 companies.

The Gordon Brothers Group, the same liquidator that oversaw the dismantling of another Wilsonville company, G.I. Joe’s, has reportedly been hired to oversee the store closures.

By: Josh Kulla