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UPDATE: Djangos Bankruptcy May Save It

20 Mar, 2002 By: Holly J. Wagner

The Portland, Ore.-based Djangos music and movie chain has filed for Chapter 11 bankruptcy protection following an unsuccessful bid to take over CDWarehouse.

Ironically, the company's filing seeking Chapter 11 bankruptcy protections may be the step it needs to restructure its debt and push forward with the acquisition, which would bring Oklahoma City, Ok.-based CD Warehouse's stores into its fold.

"We should come out of this in the next few months," said Djangos president Steve Furst. "It involves a lot of people and a lot of great partners. But to go through this to come out with the kind of financials we need, we had to do it."

Djangos has 18 stores in the San Diego, Los Angeles, Portland, Seattle and Chicago markets under the Djangos, Cellophane Square, Moby Disc and Djangos' Second Hand Tunes shingles, plus an online business, all of which deal in new and used CDs and video.

CD Wherehouse owns 64 corporate stores and franchises 231 more. They are spread across 35 states, the District of Columbia, England, Guatemala, Thailand, Canada and Venezuela and operate under the names CD Warehouse, Disc Go Round, CD Exchange and Music Trader. CD Warehouse's store trade in used CDs and DVDs as well as new, chart-topping CDs.

"The CD Warehouse deal that was going to provide us with funding for those 300 stores is over, for now," Furst said. But he still hopes to move forward after Djangos gets the go-ahead for its reorganization plan, which is due in court March 25. Meanwhile, eight administrative employees were laid off and papers filed in the bankruptcy case show $5.9 million in unsecured debt.

"We have a great network of technology and CD Warehouse has a great network of stores," Furst said, noting Djangos put $2 million into a proprietary POS system that immediately records when a used title becomes available and when the last of an item is purchased.

"It is the only real-time POS network," he said. "If you order a Beatles White Album and we only have one and you put it in your shopping cart, it disappears right away from the list. That means you get it. You don't get an e-mail five days later telling you it's out of stock."

The POS system gives his stores greater range because "Instead of having a 10-mile radius trade area, it would open the world."

A store in Portland that was doing $400,000 a year last year did $1.4 million this year after adding the online trading business, Furst said. "These stores today have someone coming in at 8 a.m. and pick and pack and ship to 168 countries."

Dangos stores typically carry about 80 percent music product but Furst wants to increase the video mix. The company also has a guaranteed return policy that helps feed its used product bins along with trading.

"The used and new music industry has been off about 10 percent," he said. "We were going to convert those [CD Warehouse] stores to CD, video and DVD."

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