SOURCE: Virgin Entertainment Group North America

April 12, 2007 09:00 ET

Virgin Megastores Announce Successful 2006 Fiscal Year

Virgin Megastores Celebrates Strong Success as the Fiscal Year Wraps Up

LOS ANGELES, CA -- (MARKET WIRE) -- April 12, 2007 -- According to the Wall Street Journal, the U.S. music CD market declined nearly 20% in the last quarter, but that wasn't the case for the North American chain of Virgin Megastores. The brand announces today that in the 2006 fiscal year, Virgin Megastore's music sales went up 5% in the final quarter and achieved positive growth for the full year, while the chain saw an overall comparable double-digit sales growth in the second half of the fiscal year. Virgin Megastores attribute some of the growth to achieving strong market shares on new releases, the very successful holiday period -- where the chain saw a 12% spike in sales during the month of December, as well as the development and diversification of the brand's new lifestyle merchandising. Virgin Megastores saw significant sales increases in several departments, including a 40% increase in electronic sales and a 50% increase in apparel and merchandise, since this time last year. The entire fiscal year of 2006 was a strong sales year for the Virgin Megastore chain, up 5.2% nationally since last year on a comparable basis, and up more than 10% in the New York City market since 2005.

"We attribute our success to a strategy we implemented a couple of years ago to diversify our product offering and focus our efforts on our key markets," explains Simon Wright, CEO, Virgin Entertainment Group International. "Virgin Megastores has undergone tremendous change to its retail operation in the past three years, including closing some under-performing stores, incorporating some major refurbishments to the brand's more popular stores -- such as the Times Square flagship as well as the San Francisco location, and the grand opening of a new west coast flagship in the heart of the entertainment capital, Hollywood."

Virgin also set new internal holiday records as the company's music, DVD and games sales outperformed the industry's expectations. For the 2006 fiscal year, Virgin was up 21% on a comparable basis, in DVD units sold, and video games sales rose 20% on a comparable basis, over the full year.

As part of Wright's plan to keep Virgin Megastores a successful music and entertainment retail outlet he set out with an extensive refurbishment and product diversification strategy, in several of the key stores, two years ago. As a result, the U.S. chain is profitable in an industry that has seen many companies go bankrupt.

"Analysts predicted that downloading would kill the music store shopping experience. We disagreed. We knew that customers still want a place to shop for music and be entertained, we just needed to expand our offer to include other areas of interest, such as more DVDs and games, to better meet their needs," Wright states.

The company attributes the success in 2006 to the brand's continued commitment to shift the Virgin Megastores into an entertainment lifestyle store; offering larger DVD, electronic, games and apparel departments. The brand has spent over $1 million in refurbishments on several of the chain's key locations. The plan for the coming year is to revamp store signage and add new in-store fixtures in support of the remerchandising effort.

Virgin's new Hollywood west coast flagship is the company's model for success, offering the latest in DVD, games, electronics, fashion and music. Virgin states the model is working well as the sales at Hollywood Virgin Megastore which is now entering its second year are up 44% in Q4 from this time last year.

Also in 2006, Virgin Megastores launched a V.I.P. Loyalty Program in two of the brand's most profitable locations -- California and New York, and have recently met a new benchmark with over 50,000 customers signing up for the program. The V.I.P. program is a first of its kind in North America and offers its members special privileges such as: trips, backstage concert passes, celebrity meet and greets, and deep discounts on selected store products.

"Our plan to become a fitter, leaner and financially stronger company is working," explains Wright. "We are continuing to make changes into this new year to improve our product offer, our customer relations and our profitability. We are confident 2007 will be another successful year for our chain."

ABOUT VIRGIN ENTERTAINMENT GROUP

Virgin Entertainment Group is the world's leading multi-channel music and entertainment retailer, providing customers with a range of superior entertainment experiences through a family of integrated Virgin-branded businesses. The "category killer" Virgin Megastores and Virgin Megastore Online at www.virginmega.com are integral parts of a strategy to provide entertainment customers with what they want, how they want it, and when they want it. For more information, or to check out the location of the nearest Virgin retail, go to www.virginmegamagazine.com

*To set up an interview with a Virgin Entertainment Group executive, please contact Krysty O'Quinn.

Contact Information