(Ian Ritter is national online editor for GlobeSt.com/RETAIL.)
MINNEAPOLIS-Musicland Holding Corp., the parent company of the Sam Goody and Suncoast mall-based chains, is closing 341 stores across the country as part of its Chapter 11 reorganization. The closings, 225 Sam Goody’s and 116 Suncoasts, will leave the company with 400 units, 191 of them Sam Goody and 209 Suncoasts.
Musicland filed for bankruptcy last month, as music sales have decreased, while competition from big-box stores and Internet downloading has been on the upswing. Musicland has also closed its chain of 61 Media Play stores.
“Closing these stores was a difficult, but necessary decision to protect the future of this company. The store closing list is based on a number of factors, including store profits and the terms of the leases at each location,” says Musicland president & chief executive officer Michael J. Madden in a statement.
Musicland executives say they have received commitments for up to $75 million in debtor-in-possession financing from a bank group led by Wachovia. The company plans to normally pay its vendors and is asking the US Bankruptcy Court for the Southern District of New York, where it filed for bankruptcy, for permission to honor customer gift cards and loyalty programs.
Musicland was acquired from Best Buy by Boca Raton, FL-based private equity Sun Capital Partners in the summer of 2003. Earlier that year Best Buy had closed 110 of the group’s units. Best Buy originally purchased the music retailer in 2000 for $441 million.
Sun Capital has been a big acquirer of retail companies in recent years. In December it acquired discounter ShopKo and its 255 stores for just under $880 million. It and Lupert-Adler Partners are partial owners of the 250-store Mervyns chain, which they acquired in 2004 with Cerebus Capital Management and Klaff Partners. Besides Mervyns, Sun Capital has stakes in the 250-restaurant Bruegger’s Bagels, as well as the 69-unit Rag Shops.