Owners believe they can get more money from other tenants. Photo / AP
Owners believe they can get more money from other tenants. Photo / AP
After nearly two decades of rocking the music world with brash stunts and splashy CD releases, the remaining six Virgin Megastores in the United States will shut their doors.
The shops received their branding from billionaire founder Sir Richard Branson and remained profitable, but the real estate firms that ownthe chain determined they could command higher rent from new tenants.
"I've been pushing back a little bit on the notion that this is just another casualty of the music industry," said Simon Wright, chief executive of Virgin Entertainment.
A slowing economy has taken its toll. To buck declining music sales, the chain broadened its offerings to include apparel, books and electronics. The six remaining stores took in about US$170 million ($344 million) in revenue a year, down from the US$230 million from 23 stores in 2002.
The lack of expansion plans and a recent decision to close the Times Square store, which had been on track to make US$56 million last year until the financial collapse began, 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."
Related Companies and Vornado Realty Trust bought the US chain in 2007 and with sales slowing, the companies figured they could make more money by charging new tenants much higher rents than the level locked in for many of the stores in multi-year leases.
The Times Square flagship will close in mid-April, to be followed by another New York store and outlets in Los Angeles, San Francisco, Orlando and Denver before June, Wright said. About 1060 staff will be laid off.
The Virgin Megastores had often opened with the kind of stunts that made Branson famous. Parachutists descended on a Salt Lake City store opening in 1992 and Branson came dressed as the Mad Hatter of Boston when that branch debuted in 2002.
"People can go online to buy music but there won't be any replacement for the events that we held," Wright said.
