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U.K. retailer Zavvi runs into trouble

Entertainment store chain close to collapse

Zavvi, one of the U.K.’s leading CD, DVD and vidgame retailers, is on the brink of bankruptcy.

The chain, formerly known as Virgin Megastore, has gone into administration, the local equivalent to Chapter 11.

The store was hit hard by last month’s collapse of retail group Woolworths, which also owns Entertainment U.K., the country’s leading supplier of entertainment product. Deprived of the supply of stock from Entertainment U.K., Zavvi was forced to pay cash to other suppliers, which led to its own demise.

Virgin Megastore, which was founded by Richard Branson in 1971, was sold to its management last year and renamed. It is now likely to be swallowed by its larger rival HMV.

Woolworths, itself one the U.K.’s leading sellers of CDs, DVDs and vidgames, closed 200 stores Saturday. The chain’s other 600 stores will close by Jan. 5.

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