Movie Gallery's Bankruptcy Highlights a Credit Concern for Blockbuster

3 page (1157 word) report published Feb 08, 2010
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...Last Wednesday, video and game rental company Movie Gallery said that it had filed for bankruptcy-court protection to reorganize its business operations, including closing around 760 stores in the U.S. Although on the surface it would appear that these store closings would help Movie Gallery's main competitor, Blockbuster, we don't expect this to be the case. In fact, we believe that Movie Gallery's bankruptcy filing has negative credit implications for Blockbuster as it shows that the shift away from bricks-and-mortar video rentals is accelerating, one of the long-term concerns factored into Blockbuster's Caa1 credit rating. We expect that lost sales from Movie Gallery's closed stores will mainly migrate to other channels of distribution and not to Blockbuster's retail stores. However, we think Blockbuster will be able to combat a portion of this shift with its multi-distribution strategy, which includes online rentals, DVD-vending kiosks and digital-on-demand distribution. Indeed, the...

Report Type: Issuer Comment
Issuer: Blockbuster Inc.
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