Business News HMV Timeline Retail

Zavvi calls in consultants to deal with financial and supply problems

By | Published on Friday 12 December 2008

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Assuming HMV can hang in there, they may find themselves in a much more dominant position because not only is Woolies seemingly about to disappear, but those previously reported rumours about the instability of that other high street music seller Zavvi aren’t going away.

As previously reported, there were reports last week that the collapse of Woolies and its sister distribution company eUK, which supplies Zavvi and its website with stock, could take the former Virgin Megastore down too. Zavvi has had to close its online operation during the busy Christmas rush because it’s not sure eUK would be able to fulfil any online orders, and its high street stores are short of new stock as the company tries to set up deals directly with other suppliers as its eUK supply runs dry. On top of all this, Woolies is undercutting Zavvi on mainstream releases with its closing down sale across the street.

To make matters worse, Zavvi is going to struggle to set up credit accounts with other providers of CDs, including the major record companies direct, given reports the retailer is one of eUK’s biggest debtors – they reportedly owe the distributor £106 million.

Word has it Ernst & Young have been parachuted into Zavvi to try and help restructure the company to overcome all these issues. The Times says that eUK’s administrators Deloitte insisted Zavvi management get the consultants in, given the size of their debt to the distributor. Pessimists in investment circles are now predicting E&Y will become Zavvi’s administrators, assuming the retailer won’t be able to tackle its financial and supply woes without going into administration. That would be bad news for the retailer’s former owners Virgin Group who still guarantee their 60 day credit account with eUK.

Zavvi, it should be noted, have denied there’s a crisis situation going on at their HQ and are expected to comment on these reports in more detail later today.



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