HITS Daily Double
"Wherehouse as a chain has a history of being a fighter, and coming back. And we all hope that they will come back again."
——Jim Urie, UMVD President


Retailer Follows Earlier Announcement of Store Closings With Reorganization Plan
Who’s minding the store?

Record retailers continue to fall in this harsh climate. In the latest bad news to hit the music business, Wherehouse Music has filed for Chapter 11 protection "in order to facilitate its capital restructuring initiatives and streamline its operations."

Earlier this month, Wherehouse had announced 30 store closings, but vendor letters made it clear that the number would rise dramatically by the end of January. In a statement today, Wherehouse said that its formal target is 150 shutterings in all, leaving them with some 250 stores that "will form a solid basis for a return to profitability."

This is the second time Wherehouse has filed Chapter 11. They last filed in 1995, emerging successfully in ’97. At the time, owners Cerberus Partners were so bullish that they went on to acquire the Blockbuster Music chain in August ’98.

Newly installed CEO Jerry Comstock points to illegal downloading and CD burning, coupled with the price wars at the major discount chains, as the primary reasons for the company’s dire straits. Comstock, who admits Wherehouse Music’s need to update and remodel their stores, believes that this filing will allow the retailer to find "an appropriate capital structure that will support re-investment in our stores."

UMVD President Jim Urie echoes the sentiments of many in the industry when he said flatly, "This sucks." But he also tells us that he believes in the current management team, which also includes Camelot and Valley Media exec Lew Garrett, and backs their plan to reorganize: "Wherehouse as a chain has a history of being a fighter, and coming back. And we all hope that they will come back again." Urie says that UMVD has been working very closely with the existing management team on the plan.

Comstock also asked the court for permission to continue to honor its current customer policies regarding merchandise returns and to honor outstanding gift cards, so that there will be minimal impact on customers. Courts typically grant such requests and Comstock fully expects the court will do so in this case.