Tower Records facing the music
Struggling retailer needs to broaden product range
June 20 2003
Tower Records – or a buyer of the business – will have reinvent the brand with a broader, more profitable range of products in order to survive, according to its US banker.
With pureplay music retailers under siege from supermarkets and general retailers selling chart music at discount prices, as well as from online sales of CDs and internet music file swapping, US-owned Tower Records has been struggling.
Parent company MTS defaulted on a $5.2m interest payment to bond holders last month, and has reported a loss for 13 consecutive quarters. In the three months to April 30, Tower reported a loss of $13.8 million on sales of $122m, down form from $137.5 million a year earlier.
Creditors of the privately owned company have been holding out for a sale of the business. Its Japanese operation has already been sold, leaving Tower with about 120 stores in five countries, including 97 in the US, three in the UK, and one in Ireland.
The focus has always been on high profile locations and big stores offering a broad range of music. Lloyd Greif of Tower’s Los Angles based bankers Greif & Co told news agency Dow Jones that Tower’s name, locations and reputation are likely to attract buyers.
He said: “We’re talking about a company that has higher sales per square foot than the mall-based retailers, a huge depth in its catalog of offerings, and whose locations are destinations for all types of media consumers.”
Greif suggested Tower could be used to create a more broad offering of electronics and entertainment products. He said: “This is a vehicle that could be easily adapted to sell other items like video games, electronic devices, digital music services.”
