Castle Megastore Recovers From Chapter 11

Tod Hunter
TEMPE, Ariz. — Adult retailer Castle Megastore has announced that it has emerged from Chapter 11 reorganization. President and CEO Mark A. Franks (pictured, left) has taken ownership of the company's assets under a new entity, Castle Megastore Group Inc.

The announcement comes after Castle met all closing conditions to the company's plan of reorganization, which was confirmed by the U.S. Bankruptcy Court in an order entered on May 19.

“Today marks a defining moment in the reinvention of Castle Megastore as a more customer-focused and leading adult retailer,” Franks said. "Concentrating on adding to the company’s retail locations and continuing to expand the brand are only the beginning of new plans on the horizon."

The bankruptcy petition, which was filed in March 2007, listed debts to Pulse Distribution, California Exotic Novelties, Marina Pacific Distributors, Pipedream Products, Topco Sales, Vibratex, Kama Sutra, Sin City Video, Nasswalk and Clear Channel.

Franks estimated the legal costs from all parties at "about $18 million."

"It was one of the biggest bankruptcy cases in the Western U.S.," Franks told XBIZ. "Every major bankruptcy firm in Phoenix was involved with this case. If you were a creditor, there were no attorneys left. It would have been a conflict."

Future plans for the chain include an online and in-store radio station and implementation of customer-relationship management (CRM) technology.

Castle Radio will include personal interviews with adult performers and live feeds from in-store signings. Castle has held more than 100 signings with performers including Jenna Jameson, Ron Jeremy, Jesse Jane, Belladonna, Stoya and Tera Patrick. Plans also call for Castle Radio to feature special events like bridal shows and its annual Halloween Fashion Show.

CRM technology will help Castle Megastores analyze customer trends and send customized email communication to help drive sales. Customers also will be able to sign up for a loyalty card that will provide exclusive benefits and discounts to members.

Founded in 1987, Castle Megastore operates 16 stores in Alaska, Arizona, New Mexico, Oregon and Washington. The stores range in size from 5,000 to 15,000 square feet and offer products including novelties, massage oils, personal stimulators, lingerie, sex toys, condoms, videos, books and magazines.

Castle Megastore Group, Inc will continue to operate in its corporate office in Tempe, Ariz.