Retailer Virgin France latest victim of digital sales
Entertainment retailer Virgin France has become the latest victim of consumers shifting to buying digital music and video, with a spokesman saying on Friday that the company is to declare itself insolvent.
The seller of CDs and DVDs employs 1,000 workers and operates 26 stores in France, including its flagship Virgin Megastore on the Avenue des Champs Elysees in Paris.
The company is to hold a works council meeting with employees on Monday to announce the insolvency, the spokesman said.
"The company has seen losses for several years," the spokesman said, noting that sales were at 286 million euros ($372 million) in 2011.
Virgin France has already taken steps to terminate its lease on its landmark location on the Champs Elysees, which accounts for 20 percent of its sales.
French media reports have suggested tech firm Apple or British retailer Marks & Spencer could be looking to take over the prime location on the famed Parisian shopping strip.
French investment firm Butler Capital Partners owns 74 percent of Virgin France after buying a controlling stake from media conglomorate Lagardere in 2007.
Lagardere purchased the company from British businessman Richard Branson's Virgin Group in 2001.
Virgin France has closed several outlets and shed 200 employees in recent years. A new management team took over in mid-2012 in a bid to rework the company's strategy.
"This is absolutely terrible news," the head of France's MEDEF employers group, Laurence Parisot, said on BFM Television.
"The crisis we are going through is not only an economic crisis," she said. "A new (business) model is being born and many sectors are being affected."
Unions representing Virgin France employees said the move was not unexpected and criticised the company's owners for not investing more and management for failing to come up with a reorganisation plan.
The head of France's CFDT union, Laurent Berger, said Virgin France had failed to adapt to the changing retail environment.
"Every sector is at some point confronted with economic difficulties," he said on France Inter radio. "Virgin did not at any point make the necessary changes in terms of economic strategy."
Another major French media retailer, FNAC, is also suffering and last year announced an 80-million-euro savings plan and the cutting of 500 jobs.
Large music, video and books retailers have struggled around the world to survive the onset of digital distribution of media.
British entertainment group HMV warned last month there was uncertainty about its future after it announced half-year losses of £36 million (44 million euros, $58 million).
The second-biggest US bookseller Borders declared bankruptcy in 2011 amid competition from online vendors such as Amazon.
© 2013 AFP