The operator of 26 French stores filed the petition with the Tribunal de Commerce de Paris, which will now decide whether to launch a negotiated restructuring or order the business into liquidation. Virgin is 80% owned by French buyout firm Butler Capital Partners, which bought control of the business in 2008.
The collapse of Virgin, which operated a prominent store on France's famous Champs Elysées, sparked an impassioned response from French Culture Minister Aurélie Filippetti, who said that tax avoidance by online retailers was partly to blame for French retailers' woes.
She promised a report that will identify and seek to close loopholes used by online retailers to avoid paying taxes in countries where their products and services are sold. The French reaction mirrors recent British anger at tax minimization schemes employed by Amazon.com Inc., Google Inc. and Starbucks Corp.
French retailers "are facing a revolution and unfair competition as a result of large firms like Amazon that do not have the same tax rules as companies that are physically based in France," Filippetti told French television station i>Tele on Wednesday.
France's tax office in November demanded $252 million in back taxes, interest and penalties from Amazon relating to "the allocation of tax between foreign jurisdictions." Amazon plans to contest the demand.
Virgin France sales have declined from about €400 million ($524 million) in 2008 to €286 million in 2011. Management responded by cutting employees and reducing the size of stores but has failed to turn around a business that has about €22 million of debt and has been unable to pay rent on its stores since late last year. Butler Capital bought Virgin from Lagardère SCA, which still owns 20% of the company.
News of Virgin's decision to file for court protection came on the same day that British camera retailer Jessops Ltd. was placed in administration. Jessops, formerly Jessops plc, operates 200 stores and had skirted bankruptcy in 2009 and 2010 before a debt-for-equity swap with its principal lender HSBC Holdings plc handed it a brief respite.
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