Christmas misery for Zavvi music store workers

More than 3,400 workers at entertainment retailer Zavvi were suffering a miserable Christmas today after the firm collapsed into administration.

The music, films and games chain became the third major retailer in 24 hours to call in the administrators as the high street’s nightmare before Christmas worsened.

Zavvi – the former Virgin Megastore chain with 125 stores – called in Ernst & Young (E&Y) yesterday after it was crippled by the collapse of Woolworths’ Entertainment UK wholesaling division.

EUK was the company’s main supplier and its demise last month left Zavvi unable to take customer orders.

The administrator said all Zavvi’s 125 stores would open as normal on St Stephen's Day for the post-Christmas sales, while efforts to sell the business as a going concern continued.

Tom Jack, Zavvi’s joint administrator, said: “In the absence of a buyer for EUK, and with dire trading conditions on the high street, the Zavvi group has seen a material fall in sales and the directors have now been forced to place parts of the group into administration.”

E&Y is administrator of Zavvi UK and liquidator of Zavvi Guernsey, although Zavvi Ireland is not currently subject to any formal insolvency proceedings.

“We are grateful for the continued support of all employees during this difficult time and would like to thank everyone at Zavvi for their commitment and hard work as the business continues to trade,” Mr Jack added.

Zavvi is the country’s largest independent entertainment retailer, with 114 stores in the UK and 11 in Ireland employing 2,363 permanent workers and 1,052 temporary staff.

Simon Douglas and Steve Peckham, the group’s founders, said: “We would like to thank all of our employees for their commitment and support since the launch of Zavvi.

“We have done all that is possible to keep the business trading, but the problems encountered with EUK, and particularly its recent failure, has been too much for the business to cope with.”

Zavvi’s woes follow those of tea and coffee merchant Whittard of Chelsea and menswear retailer The Officers Club, which were both put into administration and sold on Tuesday.

Earlier this month, 700 workers were made redundant from EUK’s head office and distribution centres in Middlesex after administrator Deloitte’s efforts to sell the business as a going concern stalled.

EUK will continue operating for the moment with a reduced workforce of 375.

The company’s collapse crippled Zavvi’s ability to renew its stock during the crucial build-up to Christmas.

Zavvi was formed from a management buyout of Virgin Megastore in September 2007 when Richard Branson sold the music chain to Zavvi’s chief executive Simon Douglas, reportedly for £1.

According to reports, Virgin Group could become liable for millions of pounds of debt as it has guaranteed Zavvi’s orders with EUK. It is understood to have underwritten around 60 days of credit for Zavvi, which ends next month.

No one at Virgin was available to comment and a spokeswoman for Ernst & Young said the administrators were not able to give details of any money owed by Zavvi.