The encyclopedia · Strategy & Leadership · Strategic decision · 2002–2009
Virgin Megastore peaked at 23 US stores — its landlords shut the chain
Virgin Megastores peaked at 23 US stores in 2002; after their sale to two property firms in 2007, the last American store shut in June 2009.
Virgin Megastore · Vornado Realty Trust · Related Companies · 2009-03
What happened
Virgin Megastore brought Richard Branson's record-label brand to American retail, and by 2002 it had grown to 23 US stores selling CDs, DVDs and electronics in landmark spaces like Times Square and San Francisco's Union Square, doing about $230 million a year in revenue.
Then the floor gave way. Digital downloads hollowed out physical music sales and revenue slid toward $170 million by 2009. In 2007 the US chain was sold to two real-estate firms — Vornado Realty Trust and the Related Companies — leaving the stores' fate in the hands of landlords rather than retailers.
On 4 March 2009 the owners announced all six remaining US stores would close by summer. Their calculation, reported by the Los Angeles Times, was that new tenants would pay more rent; once the Times Square flagship was given up — it became a Forever 21 — supporting the rest of the chain stopped making sense. The San Francisco store, 45,000 square feet on Market Street opened in 1995, began liquidating that March and closed in late April. The last stores were gone by June.
Why it happened
- Downloads hollowed out CD sales: revenue fell from $230M in 2002 to about $170M by 2009.
- The chain was owned by real-estate firms that saw higher rent from new tenants than from a music retailer.
- Once the Times Square flagship was surrendered, supporting the six remaining stores stopped making sense.
The lesson
Selling a struggling retailer to its landlords is how a chain really ends: Vornado and Related measured Virgin Megastore against the rent, and all six US stores were gone within months.
Aftermath
The Times Square site became a Forever 21; Virgin kept its label and other ventures, but never reopened a US store.
Sources
- Los Angeles Times, 4 March 2009 — Virgin Megastores in U.S. to close by summer (announced 4 March 2009; six stores remaining, down from a peak of 23 in 2002; annual revenue about $170 million, down from $230 million at peak; owned by real-estate firms which determined they could command higher rent from new tenants; slowing economy and declining music sales cited; closing the Times Square location made supporting the remaining chain untenable; all stores to shut by summer 2009)
- SFGATE, 27 February 2009 — Virgin Megastore in S.F. will liquidate (San Francisco store, 45,000 square feet at Stockton and Market, opened 1995; liquidation sales from March 2009, closing late April; chain peaked at 23 US stores in 2002 and had 11 when sold to Related Companies and Vornado Realty Trust in 2007; reasons: shift to digital downloads, one of the worst holiday shopping seasons in memory, weak consumer confidence; simultaneous closures of New York Times Square and Union Square locations; Times Square site slated to become Forever 21; three stores remained after the SF closure — Hollywood, Denver, Orlando)
spotted an error? The club wants to know.
More like this
Story taught retail how to keep changing — Macy's still let it fade
IndexPDX closed its 12-year Portland sneaker shop — Old Town foot traffic never came back
Hanifa's 45%-off sale became a two-month fulfillment mess — then it paused production
Somewhere, someone solved the problem this company failed at. 2nd Opinion →
Comments · 0
Sign in to join the comments.