Tower Records files for Chapter 11; future in doubt
source source seattlepi.com
by Marie Beaudette
posted 2006-08-22
Company cites 'intense competition' in industry
WASHINGTON—Tower Records has filed for Chapter 11 bankruptcy protection from its creditors, its second such filing in less than three years.
The company, which operates 89 stores in 20 states, including two in Seattle, sought bankruptcy protection Sunday to sell its assets through a court-supervised auction.
The Sacramento, Calif.-based company, formally known as MTS Inc., asked the U.S. Bankruptcy Court in Wilmington, Del., to approve the rules governing an auction now slated for Oct. 5. Tower said it needs to close the sale by mid-October so it has time to prepare for the holiday shopping season, when it records about 32 percent of its annual sales.
Tower, slated to go before the bankruptcy court for the first time this morning, said its revenue fell to $430 million for the fiscal year ended July 31 from $476.1 million a year earlier.
The company admits “intense” competition has hurt its business and that of other music retailers.
“The brick-and-mortar specialty music retail industry has suffered substantial deterioration recently,” Tower said in court papers.
Industry observers say the chain could have a tough time finding a buyer willing to keep its brick-and-mortar stores operating in an industry increasingly dominated by online music purveyors and big-box retailers.
Phil Leigh, a senior analyst for Inside Digital Media Inc., said the Tower brand has value and will find a buyer, but its stores aren’t likely to survive this latest bankruptcy.
