Is Virgin Planning A HMV-Style Exit?

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Author: Christman, Ed echristman@billboard.com

Retail Track

With three Virgin Megastores closing and the impending departure of the chain's highly visible chief marketing officer, Dave Alder, U.S. distributors are pondering whether Virgin Entertainment Group North America (VEGNA) is pulling a HMV.

For the first few years of the new century, HMV closed its U.S. stores one by one and danced around questions about whether it was pulling out of the United States until the answer didn't matter anymore. About a year ago, it finally issued a press release stating it would close its last three stores.

At one point Virgin had 23 stores, but with its announcement that it is shuttering its South Miami and Dallas stores this summer and its Boston store next summer, it will have 14 outlets left. That store count could go to 15 if it finds a replacement location for the Boston storeâ€"that property is being redeveloped, and Virgin says it is scouting new locations.

As we all know, actions often speak louder than words. But the current actionsâ€"the closuresâ€"are in line with Virgin Entertainment Group International CEO Simon Wright's words from two years ago (Oct. 2, 2004). At the time, Wright acknowledged that the chain had identified about 10 unprofitable store situations that needed to be solved either through closures or renegotiated rent structures. You might notice that 23 â€" 10 = 13, which is pretty close to the 14-store count that VEGNA will have if a Boston replacement store isn't found.

Let's not forget that in the United States VEGNA opened the Hollywood store in October, and remodeled and remerchandised its flagship store in Times Square. Last year, Wright told Billboard that the company's future in the States would depend on how the new merchandising model in those stores perform. Both locations feature plenty of high-margin fashion clothing and lifestyle merchandise in prominent real estate.

Wright now says that while those stores are performing well, "market conditions are tougher than expected." Nonetheless, the chain is still looking for locations in New York, California and Miami if the right real estate becomes available.

He adds that the store closings and Alder's departure are unrelated. "Alder has some plans that he wants to go off and do, and this allows him to do it."

In fact, Alder, whose last day will be May 26, played the lead role in the reinvention of Virgin's product assortment, store design, retail marketing and overall brand positioning, according to a company statement announcing his departure. Alder was with the chain for more than 20 years. Following Alder's departure, VEGNA VP of products Kevin Milligan and senior director of marketing Dee McLaughlin will report directly to Wright, who wasn't available for comment at press time.

So even though VEGNA is closing three stores and not replacing Alder, it's still too early to compare the chain's activities to that of HMV.

If between now and June 2007 VEGNA opens another Boston store or another location elsewhere, that would certainly show the chain's interest in the United States. Likewise, it will also be telling if a replacement store isn't found for the Boston area. In April 2004, VEGNA executives said they were looking for a replacement store for the Columbus, Ohio, location that shutteredâ€"an opening the folks of Columbus still await.

AFTER THE FOX: Trans World Entertainment held a highly successful marketing meeting with vendors about new advertising and promotion opportunities that left labels and distributors happy about the emphasis on using outside media.

Trans World has long been the champion of in-store promotion, but sometimes has been criticized for not using enough outside media to promote acts and drive traffic.

"We showed our vendors how we want to become an entertainment brand that will use TV, radio and in-store programs to support their artists to drive sales and incremental revenue," says Jim Litwak, president of the Albany, N.Y.-based chain.

At the meeting, Trans World told suppliers that the 150 Sam Goody stores it acquired would all change to the FYE logo during the next 18 months. The company also announced that Musicland's Sonya Askew, as director of urban marketing, would work from the company's headquarters.

The tag team of Askew and Violet Brown, the chain's urban buyer based in Los Angeles, is the best in the country, Litwak says.

Meanwhile, the company announced that Fred Fox, executive VP of merchandising and marketing, has left the chain. Director of marketing Barry Burmaster will now report directly to Litwak, and the company is looking for someone to head merchandising.

PHOTO (COLOR): ALDER

PHOTO (COLOR)

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By Ed Christman, echristman@billboard.com