Exhibit 99.1
[WHEREHOUSE MUSIC LOGO]
Wherehouse Entertainment, Inc. P.O. Box 2831
Torrance, CA
90509-2831
o
19701 Hamilton Ave.
Torrance, CA
90502-1334
Contact: Brenda Adrian
Anita-Marie Hill
Sitrick And Company
(310) 965-8898
(310) 788-2850
FOR IMMEDIATE RELEASE
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WHEREHOUSE ENTERTAINMENT, INC. FILES CHAPTER 11
TO ACHIEVE CAPITAL RESTRUCTURING INITIATIVES
TORRANCE, CALIF. - JANUARY 21, 2003 - Wherehouse Entertainment, Inc.
announced today that in order to facilitate its capital restructuring
initiatives and streamline its operations, Wherehouse and its subsidiaries filed
voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code.
Since the installation of the Company's current senior management team in June
2002, a comprehensive review of all operations including the corporate
headquarters has been underway. As part of its program to improve its
competitiveness and profitability, Wherehouse recently closed 30 stores and
expects to close an additional 120 unprofitable or underperforming stores within
the next several months. Wherehouse expects that its remaining approximately 250
stores will form a solid basis for a return to profitability. These stores will
continue to operate as normal.
"After careful evaluation of various restructuring and recapitalization
alternatives, we concluded that a voluntary reorganization under Chapter 11
presents the most effective means to restructure the Company's operations,
strengthen its capital structure and position Wherehouse to compete effectively
in the new music industry," said Wherehouse President and Chief Executive
Officer Jerry Comstock.
He said the increase in illegal downloading music and CD burning,
coupled with continued pressure from the major discount retailers to sell
product below cost has resulted in significant sales declines for the specialty
retailer.
"The retail music environment has changed dramatically in the last
three years and through the Chapter 11 process we believe Wherehouse will be
able to restructure its operations and exit underperforming stores while
creating an appropriate capital structure that will support re-investment in our
stores," Mr. Comstock said.
As part of its restructuring initiatives, the Company intends to
re-invest capital in its stores to create a more interactive environment for its
customers including remodeling the stores, increasing listening availability and
installation of interactive kiosks.
Mr. Comstock said that neither Wherehouse's customers nor its employees
at its continuing stores will notice any difference in operations as a result of
the filing. During the reorganization process vendors will be paid for
post-petition purchases of goods and services in the ordinary course. The
Company has asked for Court permission to continue to honor its current customer
policies regarding merchandise returns and to honor outstanding gift cards, so
that there will be no impact on customers. Courts typically grant such requests
and Wherehouse expects that the Court will do so here.
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"Wherehouse has been in continuous operations for over 30 years and we
anticipate that the vast majority of the music labels, as well as our other
vendors, will recognize the value of doing business with us long term. With
their support, the hard work of our employees and the actions we are taking to
restructure our balance sheet, rationalize the number of stores, and continue
initiatives to improve our product mix, we are confident Wherehouse will emerge
from this process as a stronger, leaner, more efficient operation."
The Company and its subsidiaries filed their voluntary Chapter 11
petitions in the U.S. Bankruptcy Court for the District of Delaware in
Wilmington.
Based in Torrance, California, Wherehouse Entertainment, Inc. is one of
the leading specialty retailers of prerecorded music, videocassettes, DVDs,
video games, personal electronics and accessories in the United States. The
company currently operates 370 retail stores in 23 states under the names
Wherehouse Music, Tu Musica, and XChange.
# # #
STATEMENTS MADE IN THIS PRESS RELEASE THAT STATE THE COMPANY'S OR
MANAGEMENT'S INTENTIONS, BELIEFS, EXPECTATIONS OR PREDICTIONS FOR THE FUTURE ARE
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS ARE SUBJECT TO A
NUMBER OF RISKS, ASSUMPTIONS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY'S
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED IN SUCH FORWARD-LOOKING
STATEMENTS. THESE RISKS, ASSUMPTIONS AND UNCERTAINTIES INCLUDE CHANGES IN LEVELS
OF COMPETITION FROM CURRENT COMPETITORS AND POTENTIAL NEW COMPETITION FROM BOTH
NON-TRADITIONAL RETAILERS OF THE COMPANY'S PRODUCTS AND ALTERNATIVE METHODS OR
CHANNELS OF DISTRIBUTION SUCH AS INTERNET AND TELEVISION SHOPPING SERVICES AND
MAIL ORDER; THE PRESENCE OR ABSENCE OF POPULAR NEW RELEASES AND PRODUCTS IN THE
PRODUCT CATEGORIES THE REGISTRANT REPRESENTS; CHANGES IN LEVELS OF CONSUMER
SPENDING, ESPECIALLY DURING SEASONALLY SIGNIFICANT PERIODS; CHANGES IN THE
GENERAL ECONOMIC CONDITIONS IN THE UNITED STATES INCLUDING, BUT NOT LIMITED TO,
CONSUMER SENTIMENT ABOUT THE ECONOMY IN GENERAL; AND THE ABILITY TO ATTRACT AND
RETAIN KEY PERSONNEL. THE FOREGOING SHOULD NOT BE CONSTRUED AS AN EXHAUSTIVE
LIST OF ALL FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE EXPRESSED IN FORWARD-LOOKING STATEMENTS MADE BY THE COMPANY AND
MANAGEMENT. FOR A MORE DETAILED DESCRIPTION OF THE FACTORS THAT COULD CAUSE SUCH
A DIFFERENCE, PLEASE SEE THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION. THE COMPANY DOES NOT HAVE ANY OBLIGATION TO PUBLICLY RELEASE ANY
REVISIONS TO THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES
AFTER THE DATE OF THIS PRESS RELEASE OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.
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