Virgin Megastores to declare insolvency in France
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The Virgin Megastores chain in France is set to declare insolvency next week following four years of losses due to growing competition from online music retailers and download sites.
A Virgin spokeswoman said the company will unveil a plan to file for payments suspension at a meeting with staff representatives on Monday.
This is a first step towards a court-ordered restructure or liquidation.
The spokeswoman said high rental costs in high-profile locations in city centres and falling CD and DVD sales amid competition from rising film and music downloads, as well as a recent drop in book sales, were mostly to blame for the group's financial problems.
Virgin Megastores employs around 1,000 people in France and made 286 million euros in sales last year from its 26 stores.
Its debt is estimated at around 22 million euros.
Once a part of billionaire Richard Branson’s empire, it was sold in 2001 to the French media group Lagardère, which then sold 74% to the current majority shareholder, the private equity firm Butler Capital Partners, in 2007.
The group had been closing stores and laid off 200 employees over the past two years. A new management team appointed in mid-2012 had said it planned to restructure the group by selling through smaller stores.
In December, it announced the closure of its flagship store on Paris’s Champs-Elysées. Dubbed the “largest music department store in the world”, the store had been on the iconic strip for 25 years and generates 20% of Virgin Megastores’ revenues.
Virgin’s largest competitor in France, Fnac, is looking for a buyer and announced a plan early last year to save 80 million euros and lay off 500 jobs worldwide, including 310 jobs in France.
In the UK, Virgin Megastores closed down in 2008.
Similar concept stores such as Borders in the United States have also closed down due to growing online competition.