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Zavvi to go, HMV buys more stores, so does a thing called Head

By | Published on Thursday 19 February 2009

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So, Zavvi is officially no more. The former Virgin Megastore will disappear from the high street this week, with 18 of its remaining stores, including its iconic Oxford Street home (iconic because it was Richard Branson’s very first Megastore) closing their doors.

Confirmation of the former Megastore chain’s full closure was announced by Zavvi’s administrators Ernst & Young yesterday. Most of Zavvi’s 130 stores, though, had already closed of course, with doors being shut on Zavvi units across the UK every couple of weeks since the company went into administration just before Christmas.

Before the final nail was hit into the Zavvi coffin, administrators announced two deals that will rescue between 10 and 13 shops. First HMV, who had already bought 14 of Zavvi’s stores in the UK and Ireland last month, confirmed it was taking on another five.

Meanwhile a new company set up by Zavvi’s CEO, Simon Douglas, the man who led the management buyout that turned Virgin Megastore into Zavvi back in 2007, bought five and may as yet buy three more. That company is expected to run stores similar in format to Zavvi in those five to eight locations, though under a new name. The new firm is called Head Entertainment, and it’s thought they will trade under the name Head. Which is not quite as bad a name as Zavvi, though it’s not great.

Confirming that the Zavvi chain would finally close completely this week, administrator Tom Jack said he was pleased the HMV and Head deals would save the jobs of 629 of the chain’s 2360 odd employees. He told reporters: “Whilst it has not been possible to secure a sale of the business as a going concern, we are delighted to have been able to secure continued employment for 629 Zavvi employees. This is a fantastic result for the employees and customers of the stores concerned”.

He added: “I would like to thank all of Zavvi’s staff and customers for their commitment and continued support for the business throughout the administration”.

In related news, the Office Of Fair Trading has said it will review HMV’s purchase of former Zavvi stores to see if there are any possible conflicts with UK and European merger rules. Or at least I think that’s what they said.

They confirmed that they were “considering whether arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002”. If such a “merger situation” was deemed to have been created the OFT would investigate HMV’s purchase in more detail, and could pass the deal over to the Competition Commission for review, though that doesn’t seem likely. The OFT’s comments related to HMV’s original purchase of nine UK Zavvi stores, but presumably its new deal for five more will also be considered by the review.

In other related news, the demise of the Virgin Megastore in New York’s Times Square will result in “the biggest sale in music retail history”, apparently. As previously reported, while the UK Megastore chain rebranded when it was sold by Richard Branson’s Virgin Group, the US stores kept the name after they were acquired by Related Companies. However the new owner, a real estate group, made it no secret that their plan was to wind down the music chain and profit by leasing out its prime location retail units to other firms. The prestigious Times Square store is the latest to be closed, and managers are promising that prices on goods sitting in the shop will be completely slashed in a bid to clear stock. The sale starts today, so if you’re in NYC it might be worth checking out.



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