Zavvi moves to protect customers

Published on Sunday 14 December 2008 20:20

ZAVVI, the entertainment retailer, is believed to be ring-fencing money in an attempt to protect customers in the event of being placed into administration.

The company, which was formed out of the sale of Sir Richard Branson's Virgin Mega-stores, brought in a team from Ernst & Young late last week to advise it on its finances.

Separate bank accounts have reportedly been set up to ring-fence customers' money, a move that could provide confidence to those planning to buy vouchers from the DVD and music store in the lead up to Christmas.

Zavvi's trading has come under the spotlight following the collapse of high street icon Woolworths.

Besides a clearance sale of Woolworths' entertainment stock hitting trading, Zavvi – which has 15 stores in Scotland – reportedly owes around 100 million to EUK, Woolworths' distribution arm. Corporate recovery experts from many firms expect a surge in activity in January as consumers rein in on spending and quarterly rent bills fall due.

Ernst & Young's insolvency team is believed to have identified up to 40 retailers that could be on the brink.

Banks are widely believed to be giving many companies until after Christmas to prove an ability to trade out of troubles or face demands to repay debt.