Virgin selling Stateside stores to Related after improved performance.

Virgin North America's Megastore chain poised to capitalise on a successful turnaround for the brand by selling stores to Related Companies

Retail

Virgin Megastores' North American chain is poised to begin a new phase of expansion on the back of a deal to sell the business to investment firm Related Companies.

Related is understood to be looking to invest around $50m (#25m) in the business, which at its peak numbered more than 20 stores, but has since scaled back to 11 outlets across 400,000 sq ft of retail space. However, the retailer has recently been bucking the trend of falling physical music sales in the US, with a reported 5% growth in its most recent financial results.

Under the deal, Related will take control of all the existing stores, including the flagship New York outlet in Times Square, which became the biggest entertainment retail destination in the world when it opened in 1996. The stores will continue to operate under the Virgin Megastores name as part of a 20-year brand licensing deal and are likely to be joined by a number of new stores. Financial details of the deal have not been disclosed.

Virgin Entertainment Group CEO Simon Wright will transfer to Related and continue to oversee the American stores once the takeover is completed. He will not be drawn on any specifics about expansion, but concedes, "It is definitely on the agenda. Watch this space."

Virgin's decision to dispose of the stores follows a period of what Wright describes as the business "very successfully" being turned around and making money again. In its most-recently-published figures for the final fiscal quarter of 2006, music sales in the US Megastores grew by 5.2%, with an increase of more than 10% in the New York City stores.