This is amazing to me, as a New York resident. We lost Tower Records and now both Virgin Megastores will go. There remain an abundance of great local music stores. But it's unbelievable that there won't be any big places to buy CDs in New York City.
Interestingly, this seems to be in large part a real estate decision. The chain's U.S. owners--real estate firms Vornado Realty Trust and Related--think the locations could prove more profitable leased to other uses. So at least they think there's a market for these large spaces. That's at least a little bit of a silver lining to the story.
A slowing economy took its toll. To buck declining music sales, the chain broadened its offerings in the last few years to apparel, books and electronics. The six remaining stores took in about $170 million in revenue a year, down from the $230 million from 23 stores at its peak in 2002.
The lack of expansion plans and a recent decision to close the Times Square location in New York, which had been on track to make $56 million last year until the financial collapse began in September, made supporting the rest of the chain untenable, Wright said.
"Our six best stores from a retail point of view are also our six best stores from a real estate point of view," Wright said.
The joint venture of Related Companies and Vornado Realty Trust bought the U.S. chain in 2007, and with sales slowing, the companies figured they can make more money by simply turning the properties over to new tenants, who will likely pay much higher rents than the level locked in for many of the stores in multiyear leases.
The 52,000-square-foot Times Square flagship closes in mid-April, to be followed by another New York store and outlets in Los Angeles, San Francisco, Orlando, Fla., and Denver, all by June, Wright said. About 1,000 staff and 60 at the corporate level will be laid off.
Bankruptcies and Liquidations:
- Jan. 7, Goody's liquidates, closing 287 stores
- Jan. 8, Against All Odds files for bankruptcy protection, operates 64 stores overall, plans to close West Coast stores
- Jan. 13, Shane Co. files for bankruptcy, operates 23 stores
- Jan. 14, Gottschalks files for bankruptcy, operates 58 stores
- Jan. 16, Circuit City to Liquidate, closing 567 stores
- Feb. 6, Fortunoff, operates 20 stores
- Feb. 6, Bruno's, operates 66 stores
- Feb. 12, S&K Famous Brands, operates 136 stores; Update: Feb. 19, plans to close 30.
- Feb. 17, Innovation Luggage, operates 10 stores
- Feb. 23, Ritz Camera, operates about 1,000 stores
Potential Bankruptcies & Liquidation Impact: 884 confirmed closures out of about 2,231 stores
- Jan. 8, New York & Co., 50 stores
- Jan. 8, Macy's, 11 stores
- Jan. 9, Supervalu, 50 stores
- Jan. 13, Cost Plus, 26 stores
- Jan. 20, Yankee Candle, 28 Illuminations stores
- Jan. 21, Filene's Basement, 11 stores
- Jan. 22, Phillips-Van Heusen, 175 stores
- Jan 22, Brown Shoe, up to 35 Famous Footwear stores
- Jan. 26, Home Depot, 48 stores
- Jan. 29, Starbucks, 200 U.S. Stores (plus 100 international)
- Jan. 29, Chico's, up to 25 stores
- Feb. 9, Talbots, 20 stores
- Feb. 24, Jimmy'Z, 11 stores
- Feb. 24, Z. Gallerie, 25 stores
- Feb. 25, Zale Corp., 115 stores
- Feb. 27, Sears, 44 stores
- March 3, Virgin Megastores, 6 stores
Total Closings: up to 880 U.S. stores
Potential Impact of All Announcements to Date: 1,764 closures out of up to 3,111 potentially affected U.S. stores