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Virgin Megastores in U.S. to close by summer

The real estate joint venture that owns the chain figures it can make more money by closing its remaining outlets, including one in L.A., and leasing the properties to new tenants.

March 04, 2009|Associated Press

After rocking the music world for nearly two decades with a mix of brash stunts and splashy CD releases, the remaining six Virgin Megastores in the United States will shut their doors this summer in another blow to recorded music.

The hipster shops received their branding from billionaire founder Richard Branson and remained profitable, but the real estate firms that own the U.S. chain determined that 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 Group Inc.

A slowing economy took its toll. To buck declining music sales, the chain broadened its offerings in the last few years to apparel, books and electronics.

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, 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," he said.

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