From wherehousemusic.com...
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Wherehouse Entertainment, Inc. Files Chapter 11 to Achieve Capital Restructuring Initiatives
Torrance, Calif. – January 21, 2003 – Wherehouse Entertainment, Inc. announced today that in order to facilitate its capital restructuring initiatives and streamline its operations, Wherehouse and its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code. Since the installation of the Company’s current senior management team in June 2002, a comprehensive review of all operations including the corporate headquarters has been underway. As part of its program to improve its competitiveness and profitability, Wherehouse recently closed 30 stores and expects to close an additional 120 unprofitable or underperforming stores within the next several months. Wherehouse expects that its remaining approximately 250 stores will form a solid basis for a return to profitability. These stores will continue to operate as normal.
“After careful evaluation of various restructuring and recapitalization alternatives, we concluded that a voluntary reorganization under Chapter 11 presents the most effective means to restructure the Company’s operations, strengthen its capital structure and position Wherehouse to compete effectively in the new music industry,” said Wherehouse President and Chief Executive Officer Jerry Comstock.
He said the increase in illegal downloading music and CD burning, coupled with continued pressure from the major discount retailers to sell product below cost has resulted in significant sales declines for the specialty retailer.
“The retail music environment has changed dramatically in the last three years and through the Chapter 11 process we believe Wherehouse will be able to restructure its operations and exit underperforming stores while creating an appropriate capital structure that will support re-investment in our stores,” Mr. Comstock said.
As part of its restructuring initiatives, the Company intends to re-invest capital in its stores to create a more interactive environment for its customers including remodeling the stores, increasing listening availability and installation of interactive kiosks.
Mr. Comstock said that neither Wherehouse’s customers nor its employees at its continuing stores will notice any difference in operations as a result of the filing. During the reorganization process vendors will be paid for post-petition purchases of goods and services in the ordinary course. The Company has asked for Court permission to continue to honor its current customer policies regarding merchandise returns and to honor outstanding gift cards, so that there will be no impact on customers. Courts typically grant such requests and Wherehouse expects that the Court will do so here.
“Wherehouse has been in continuous operations for over 30 years and we anticipate that the vast majority of the music labels, as well as our other vendors, will recognize the value of doing business with us long term. With their support, the hard work of our employees and the actions we are taking to restructure our balance sheet, rationalize the number of stores, and continue initiatives to improve our product mix, we are confident Wherehouse will emerge from this process as a stronger, leaner, more efficient operation.”
The Company and its subsidiaries filed their voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the District of Delaware in Wilmington.
Based in Torrance, California, Wherehouse Entertainment, Inc. is one of the leading specialty retailers of prerecorded music, videocassettes, DVDs, video games, personal electronics and accessories in the United States. The company currently operates 370 retail stores in 23 states under the names Wherehouse Music, Tu Musica, and XChange
