British music and entertainment merchant Music Zone has entered into administration after succumbing to a "challenging" retail climate.

Bill Dawson, partner at accountancy giant Deloitte, has been appointed administrator for the High Street chain, which has been a feature of the British music retail landscape for more than two decades.

Around 1,100 staff are currently employed with the 104-store, Stockport, England-based chain. Revenue for the current financial year ending this May is forecast at £115 million ($227 million).

Insiders at the retailer are blaming downward pressure on margins and generally difficult trading conditions. "Pre-Christmas spending was also poorer than expected," a spokesperson for Music Zone commented in a statement, issued today (Jan. 3).

"The decision by our bankers to recover debts and withdraw credit facilities without notice and with immediate effect left us and our private equity backers with no real alternative other than to appoint administrators."

Dawson notes, "We're currently trading the business while seeking interested parties to acquire Music Zone as a going concern."

In March 2005, the independent retailer was acquired from its founder Russ Grainger in a £12 million ($22 million) management buyout. The firm is currently owned by its management team, spearheaded by managing director Steve Oliver, and venture capitalist Lloyds TSB Development Capital (LDC).

The new owners subsequently boasted that they were "gearing up for a major assault on U.K. high streets" over the following three years.

Later in 2005, the company went on the acquisition trail, buying up 41 stores from the MVC brand, which had itself entered into administration. Those stores also brought 437 staff into the enlarged group.

A spokesman for LDC, however, explains that Music Zone has "struggled in the face of aggressive pricing and deteriorating sales across the music and DVD sector."

U.K. retail giants HMV and Woolworths have also admitted to feeling the pinch. In a pre-Christmas statement, Woolworths warned that its "most challenging market" was entertainment." HMV later said the deteriorating British CD and DVD market would affect its own bottom line.

Music Zone began life in 1984 as a single-store operation in Stockport. By 2005, the group had risen to be the No. 3-ranked music specialist in Britain, behind HMV and Virgin, respectively. During that period, the group accounted for 2.6% of expenditure on albums in the United Kingdom, and 4.4% of singles sales, according to data published in the BPI 2006 "Statistical Handbook."

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