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Shopping Centers Today -> May 2003
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ANY TAKERS FOR MUSICLAND?
BY IAN RITTER
Best Buy Co., which announced March 31 that it would sell its Musicland Group subsidiary, may have trouble actually doing so. The division includes 736 Sam Goody, 383 Suncoast and 76 Media Play stores.
Specialty music retail sales are down because consumers are burning rather than buying CDs and downloading a lot of music off the Internet. Music retailers also face tough competition from such discounters as Wal-Mart, which mark their CDs down to cost or below.
For the year through Dec. 29, album sales fell 10.7 percent from the year before, according to Nielsen SoundScan, which tracks music sales through retail store bar-code scans.
“Over the last year, Musicland has suffered from further declines in CD sales and a continued slowdown in traffic in traditional shopping centers nationwide,” said Best Buy CEO Brad Anderson in a press release. “In addition, it has been less successful than we had hoped in selling consumer electronics in its mall stores.”
Best Buy, which bought Musicland in December 2000, was frustrated in its efforts to shift the company’s focus to consumer electronics. Lease restrictions kept it from competing with other electronics retailers in shopping centers. Best Buy closed 110 Musicland division stores — 90 Sam Goodys and 20 Suncoasts — in January.
That month Torrance, Calif.-based specialty music retailer Wherehouse Music filed for Chapter 11. Industry analysts expect Albany, N.Y.-based Trans World Entertainment Corp., which operates 860 stores nationwide, mostly under the FYE brand, to close stores too.
Surprisingly, Trans World may be one of the few companies that could buy Musicland, according to Ed Christman, senior retail editor at music industry trade magazine Billboard. Doing that would give Trans World better West Coast exposure, he says.
“If it’s a bargain, I can see them being interested,” said Christman. “If it’s not a bargain, I can’t see them interested.”
Trans World CFO John Sullivan declined to comment.
Another possibility is that an investment group or a company turnaround specialist could be interested in Musicland, analysts say.
Besides the Musicland stores, Best Buy operates 548 Best Buy and eight Best Buy Canada stores, 104 Future Shop units and 19 Magnolia Hi-Fi stores.
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