Electonrics retailing giant Best Buy has sold Musicland, the struggling chain of 1,100 retail stores that includes the Sam Goody, Media Play, and Suncoast stores, to Sun Capital Partners, a private leverage buyout and turnaround firm based in Boca Raton, Florida. Best Buy bought the Musicland stores in January of 2001 for $685 million, which included a $261 million debt. Best Buy will not receive any cash from the sale of Musicland, but Sun Capital has agreed to take on all of the music chain's liabilities, including all lease obligations. The sale of the Musicland stores is of great interest to pop culture retailers since the chain is a major retailer of anime, manga, and toys and other licensed merchandise. The Suncoast stores in particular were quick to seize the opportunities presented by anime -- and the Suncoast stores have become an important player in the sales of manga as well (see 'Suncoast Adds Manga Spinners'). Suncoast, which specialized in video sales, was Musicland's only profitable branch. Both Sam Goody and Media Play have been hard hit by the decline in sales of music CDs over the past two years. Best Buy took a $441 million dollar charge related to Musicland in April (see 'Best Buy Shedding Musicland'), and now appears to be in the clear.
Sun Capital Partners has invested in a wide variety of financially troubled companies ranging from Northland Cranberries to Mackie, a company that makes high end sound equipment. The closest thing to the Musicland retail chain acquired by Sun Capital would probably be Bruegger's Bagels (250 stores) and Wickes Furniture (35 stores). Neither organization shows any sign of wholesale dismemberment. In the year since Sun Capital Partners invested in the Wickes Furniture chain, the company (with SCP's blessing) has made plans to open 5-6 new locations. That doesn't mean that all the Musicland stores are safe, Best Buy closed over 100 at the beginning of the year (see 'Best Buy Shutters 110 Musicland Stores') and the continuing decline in sales of music CDs does put the music-based stores at risk, but the fact that the Suncoast stores have remained profitable should keep that part of the chain intact -- and perhaps even encourage growth and conversions of other outlets into the Suncoast model. A check of some of the companies that Sun Capital Partners have turned around indicates that the turnarounds typically stem from concentrating resources on the most profitable sectors of the business, which in this case would appear to be Suncoast.