U.K. entertainment retail chain Zavvi, has gone into administration, the U.K. equivalent of Chapter 11 bankrutcy protection.
Administrators Ernst & Young said today they intended to trade the 114-store Zavvi UK with a view to selling all or part of the business as a going concern.
Zavvi was formed just 15 months ago from a management buyout of the Virgin Megastore division of the Virgin Group.
Last month Entertainment UK, Zavvi’s main supplier and part of Woolworths, went into administration which meant Zavvi had difficulty obtaining stock on favourable credit terms.
This resulted in considerable working capital difficulties, in addition to continuing operating losses.
“In the absence of a buyer for EUK, and with dire trading conditions on the high street, the Zavvi Group has seen a material fall in sales and the directors have now been forced to place parts of the group in administration,” said joint administrator Tom Jack.
Ernst & Young said Zavvi Guernsey will be liquidated, while the 11-store Zavvi Ireland business was not subject to any formal insolvency proceedings.
The Zavvi Group as a whole employs 2,363 permanent staff and 1,052 temporary staff.
Its collapse, coming hours after two other well-known UK retailers moved into administration, underlined the pressure the sector is facing from the consumer downturn.
Late on Tuesday (Dec. 23) British menswear retailer The Officers Club appointed PricewaterhouseCoopers as administrators who promptly sold 118 of its 150 stores to its chief executive, David Charlton. Although 32 stores will close, the deal secured the jobs of 1,000 staff.
Hours earlier Whittard of Chelsea, the 165-store tea and coffee retailer owned by troubled Icelandic investor Baugur, brought in Ernst & Young, who immediately sold the business to private equity investor Epic for an undisclosed sum.
