The move came as the locally based second-largest movie rentalchain was suffering losses from competition with rival Blockbusterand Netflix, the online movie rental company. In addition, thecompany was grappling with absorption of its 2005 acquisition ofHollywood Entertainment Corp., which left it with nearly $1.3billion in debt.

During 2006, Movie Gallery closed 230 under-performing andoverlapping stores and opened just 123 new units, which JosephMalugen, chairman, president and CEO, said during a conferencecall, "were already in the pipeline. We don't expect many openingsthis year," he added.

During fourth-quarter 2006, Movie Gallery's net profits narrowedto a minus $15.1 million, versus a loss of $546.5 million in thesame quarter a year ago, Its full-year net loss was $25.7 million,compared with a loss of $552.7 million for 2005.