PARIS Books-to-music retailer Virgin Megastore France will formally declare itself insolvent on Wednesday, the latest casualty of an industry-wide slump in CD and DVD sales as consumers download more film and music online.
The filing, the first step towards a possible court-ordered company restructuring in France, coincides with the start of winter clearance sales in a morose economic climate.
Shoppers are reining in spending in the euro zone's second-biggest economy where the total number of people out of work is at a 15-year high [ID:nL5E9C2AB6].
Virgin Megastore France, which employs 1,000 people, met staff representatives on Monday and Tuesday. Laurent Parquet, a representative of majority-owner private equity firm Butler Capital Partners, also attended the meetings.
"The company is in a situation of payment suspension and management said it could not let this continue," Virgin Megastore France said on Tuesday. "This filing for insolvency will thus take place from tomorrow."
The commerce court will decide whether the firm, which operates 26 Virgin-branded stores in France, including a flagship operation on the Champs-Elysees in Paris, can be restructured or should be closed down.
The group, which has annual sales of nearly 300 million euros ($392 million), has been loss-making for the past four years. It has blamed its problems on rental costs in high-profile city centre locations, falling CD and DVD sales and a recent drop in book sales.
Laurent Parquet said: "Virgin has been going through difficult times for a long time. We have invested a lot in this company. We tried to straighten out the company's accounts. Now our concern is to find the best possible solution".
Guy Olharan, a representative for the CGT union said he was still hoping a buyer could be found. After meeting culture minister Aurelie Filipetti, Olharan said: "We hope the French government will actively engage itself on our side". Workers will protest in front of the Champs-Elysees store on Wednesday.
Butler Capital Partners bought a majority stake in Virgin Megastore France in 2007 from media-to-aerospace group Lagardere (LAGA.PA) which itself bought the chain from founder Richard Branson in 2001.
(Reporting by Dominique Vidalon; Additional reporting Marine Pennetier; Editing by Dan Lalor)