And another one's down. Virgin Megastores, founder Sir Richard Branson's music super chain, is the latest retailer to bite the dust. As the Chicago Tribune reports, the real estate joint venture that owns the US portion of the chain thinks it can make more money by closing the remaining stores and leasing the property to new tenants.
From the Trib: "The six remaining stores took in about $170 million in annual revenue, down from the $230 million from 23 stores at its peak in 2002. The lack of expansion plans and a decision to close the Times Square location made supporting the rest of the chain untenable."
Set to shudder this summer, Virgin Megastores joins a growing list of big-name retailers to be gobbled up and spit out by the economy, a list that includes: Circuit City, Steve & Barry's, Linens 'n' Things, KB Toys, Sharper Image, Tweeter, Bombay Co., and Mervyns. The question industry observers are now asking is, who's next?As the LA Times reports, the answer could be struggling video store chain Blockbuster. The company just hired international law firm Kirkland & Ellis, which immediately prompted industry analysts to conclude Blockbuster was preparing to file for bankruptcy. The retailer's stock plummeted on the news, leading to a hasty statement from Blockbuster that the company hired Kirkland & Ellis to simply "help arrange financing."
That may very well be true, but you can't help but think the move screams "bankruptcy!" when you see that Kirkland & Ellis was selected for an Award for Excellence by rating agency Chambers & Partners in 2008. What was the award for? As Kirkland & Ellis touts on its Web site: "The group was recognized in the Bankruptcy Team category for providing superior service to its clients."
If this were a court case, I believe that would be described as "damning evidence." But let's go back to Virgin Megastores for a moment, shall we? It's interesting to note the UK brand announced its demise on the very same day Best Buy announced it would be delaying its jump across the pond. As Reuters reports, "The specialty retailer of consumer electronics had planned to open its first store in Britain in the summer of 2009, in a joint venture with Carphone Warehouse." Now Best Buy has decided to hold off until the first quarter of 2010.
It's a prudent move by Best Buy, as it appears things are going to get worse before they get better. As the Boston Globe reports, when big name retailers shudder their shops, as a growing number are doing, there is a ripple effect on other businesses that is just now beginning to be felt. From surrounding sandwich shops to manufacturers to creditors, Globe reporter Erin Ailworth does a great job detailing the ripple effect produced by Circuity City's demise.
"By the time the last Circuit City store switches off its lights, about 34,000 employees will have lost jobs, including about 600 in Massachusetts," Ailworth writes. "But the company's failure will resonate far beyond its payroll. Some of the damage is easy to measure - more than 200 creditors in Massachusetts alone say the company owes them a total of nearly $28 million - but other effects are less apparent. For example, the Ninety Nine Restaurant in Somerville and Lexington House of Pizza, where Circuit City employees from nearby stores often bought food, will lose revenue. So will E.B. Carlson Marketing in West Boylston, which sold software and game controllers to the retailer. Marketing firms that promoted Circuit City are losing accounts, too, as are contracted cleaning crews that swept floors and emptied trash bins, trucking companies that delivered goods, and radio stations and newspapers that relied on Circuit City advertising."
In a word: grim. But at the Daily Dose, we make a concerted effort to add the silver lining. Today, it's the news that BJ's Wholesale Club increased its fourth quarter profit 5% even as its larger competitor, Costco, reported a profit decline. This New York Times story provides all the financial details. What it doesn't cover is the success story that is BJ's. Since Herb Zarkin became CEO in 2007 and named Laura Sen president and COO, the once struggling club has been on a roll, posting dramatic month-after-month sales increases.
How are they doing it in the face of a major economic recession and with one of BJ's biggest competitors posting a simultaneous 27% profit plunge for the quarter? As we reported in our August cover story, Zarkin and Sen went back to basics, focused on the fundamentals, and made a concerted effort to provide BJ's customers with everyday value.
It's a philosophy all retailers should heed in these lean economic times, because Queen's iconic bass line is in the air, and Freddie Mercury is just waiting to wail that all-too-familiar refrain.
Michael Sharkey is the Editor-in-Chief of Retail Merchandiser.