MINNETONKA, Minn. (AP) - Musicland Holding Corp., the parent company for Sam Goody music and Suncoast video stores, filed for Chapter 11 bankruptcy protection late Thursday.
Sam Goody has a store located on First Street in Willmar.
Musicland took the step after sustaining years of losses at its mall-based stores, which were battered by competition from superstores such as Circuit City and its one-time owner, Best Buy, as well as the slump in the music business. The growth in music downloading from the Internet also hurt.
Its sales have plunged 42 percent, from $1.89 billion in 1999 to an estimated $1.1 billion in 2005. The company hasn't made a profit since 2001.
The Minnetonka-based retailer operates more than 800 Sam Goody, Suncoast Motion Picture Co. and Media Play stores. It said Chapter 11 would enable it to exit some unprofitable leases.
"We have a number of stores in locations that aren't ideal," said Michael Madden, president and chief executive. "We need to clean up and reposition our real estate portfolio."
Madden said the chain expects to emerge from bankruptcy with fewer stores, but that it was too early to specify how many will close. He said the Sam Goody and Suncoast chains would continue to operate. The company has about 6,000 employees.
The impact on customers will be limited, Musicland said. The company asked for bankruptcy court permission to honor merchandise returns and all outstanding gift cards and loyalty programs.
Musicland listed assets of $371.5 million and debts of $485.6 million in its filing with the U.S. Bankruptcy Court in the Southern District of New York. The company said it has received commitments for up to $75 million in financing from its existing bank group, which will allow it to keep operating.
The company began struggling a decade ago as big-box retailers siphoned customers away, luring them away with music and movies often priced $3 to $4 cheaper.
Musicland tried to respond with its own chain of superstores, Media Play, which sold books, videos, music and computer software. However, Media Play, too, couldn't compete with discount retailers, and Musicland announced last month that it would close all 61 remaining Media Play stores while maintaining the Internet site MediaPlay.com.
Best Buy Co. Inc. bought Musicland in 2001 for $696 million, but Musicland proved to be a drain on Best Buy. In 2003, Best Buy unloaded it by signing it over to a private-equity firm, Sun Capital Partners Inc. of Boca Raton, Fla., for no cash.
On the Net: http://www.musicland.com