PARIS — Virgin Megastore’s French operation plans to declare itself insolvent next week, the latest victim of an industry-wide slump in CD and DVD sales as consumers download more film and music online.
The plan comes as retailing woes intensify in the euro zone’s second-biggest economy, where the jobless rate is close to a 15-year high and where shoppers are reining in spending.
Virgin France, which employs 1,000 people, will unveil a plan to file for payments suspension at a meeting of staff representatives on Jan. 7, a company spokeswoman said on Friday.
The French division has been unprofitable throughout the past four years and piled up an estimated debt of €22 million, or $28.8 million).
Filing to suspend payments is the first step towards a court-ordered company restructuring in France.
The company, which is no longer in the hands of 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, HMV last month said that it had “12 critical days” to pull in Christmas sales and help to avoid a likely breach of its banking agreements at the end of January.
Virgin France is owned by the private equity firm Butler Capital Partners, which bought a majority stake in 2007 from the French media-to-aerospace conglomerate Lagardère. Mr. Branson had sold the chain to Lagardère in 2001.
The group, which operates 26 Virgin-branded stores in France, including a flagship operation on the Champs-Elysées in Paris, generates annual sales of nearly €300 million.
High rental costs in high-profile locations in city centers and falling CD and DVD sales amid competition from film and music downloads, as well as a recent drop in book sales, were mostly to blame for the group’s financial problems, the spokeswoman said.
Workers at the Champs-Elysées store, which opened in 1988, went on strike on Dec. 29 to protest plans by management to terminate the lease at the premises.
Article source: http://www.nytimes.com/2013/01/05/business/global/virgin-france-to-announce-insolvency-plan-monday.html?partner=rss&emc=rss