PARIS — Virgin Megastore’s operation in France plans to declare itself insolvent in the coming week, the latest victim of an industrywide slump in compact disc and DVD sales as consumers download more film and music online.
Virgin France, which employs about 1,000 people, will announce to employees on Monday that it plans to suspend payments to suppliers, a company spokeswoman said Friday. Filing to suspend payments is the first step in France toward a court-ordered company restructuring.
Retailers in France, which has the euro zone’s second-biggest economy after Germany, are struggling: Unemployment is close to a 15-year high, and consumer spending has been soft.
Virgin’s operations in France have been unprofitable in the past four years, with debt for the division reaching €22 million, or $28.8 million, according to French media.
The company, which is no longer controlled by Richard Branson, the billionaire founder of Virgin Group, is not the only music retailer suffering from the industry slump. Its chief domestic rival, Fnac, is being spun off by its parent company, PPR, and has sold its Italian businesses.
In Britain, the global chain HMV said last month that it had “12 critical days” to pull in Christmas sales to help avoid breaching its banking agreements by the end of this month.
Virgin France is owned by the private equity firm Butler Capital Partners, which bought a majority stake in 2007 from the French conglomerate Lagardère. Mr. Branson sold the chain to Lagardère in 2001.
The group, which operates 26 Virgin- branded stores in France, including a flagship operation on the Champs- Élysées in Paris, generates annual sales of nearly €300 million.
Steep rental costs in high-profile locations in city centers and falling CD and DVD sales, combined with a recent decline in book sales, were mostly to blame for the group’s financial problems, the spokeswoman said.
Workers at the Champs-Élysées store, which opened in 1988, went on strike Dec. 29 to protest plans by management to terminate the lease at the premises.
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Article source: http://www.nytimes.com/2013/01/05/business/global/virgin-france-to-announce-insolvency-plan-monday.html?partner=rss&emc=rss
