Bloomberg News

HMV Group’s Christmas-Period Sales 8.2% Lower on Weak Demand

January 09, 2012

(Updates with closing share price in 12th paragraph.)

Jan. 9 (Bloomberg) -- HMV Group Plc, the U.K.’s biggest CD and DVD retailer, said sales in the five weeks to Dec. 31, the key Christmas period, were 8.2 percent lower than a year earlier, because of a “challenging” trading environment.

Same-store sales declined 9.8 percent in the nine weeks to that date, the period since the fiscal first half, and doubts remain about the company’s ability to continue as a going concern, reported last month, Maidenhead, England-based HMV said in a regulatory statement.

“Undoubtedly, trading conditions and the consumer environment remain challenging, but we remain confident in HMV’s future prospects,” Chief Executive Officer Simon Fox said in the statement.

The company’s strategic review of HMV Live, its events division, is making good progress and talks with banks are “constructive and positive,” according to the statement.

In June, HMV reported a 123.1 million-pound ($198 million) full-year loss after taking impairment charges on the sales of Canadian outlets and Waterstone’s book chain. Last month, it reported a first-half loss that widened by 32 percent to 36.4 million pounds and said weak trading might cast “significant doubt” on its ability to go on.

“These are still disappointing results but they’re broadly in line with our expectations,” Fox said by phone. December accounts for a quarter of HMV’s annual sales.

HMV Live

The company has 90 million pounds of debt due in September 2013 and wants to raise funds from a sale of HMV Live before an interest-rate increase in January 2013.

Breaking even looks unattainable and a sale of HMV Live won’t be enough to pay down debt, Peel Hunt analyst John Stevenson said in a note.

HMV is not currently looking to sell its stake in the music service 7digital, Fox said. “We’ve said that it’s something we can look at but at the moment there is no process ongoing in relation to that,” he said.

The company is cutting back on CDs and DVDs in favor of consumer electronics. Items such as MP3 players and headphones account for 12 percent of HMV U.K. sales, while CDs represent 25 percent and DVDs 45 percent, Fox said. Technology sales rose 51 percent in the Christmas five weeks. About 500,000 pairs of headphones and 20,000 tablet computers were sold.

“The measures we’re taking to turn the business around are starting to bear fruit,” Fox said, adding that he’s confident HMV will be “around for some time to come.”

The stock fell as much as 10 percent in London trading and closed down 1.7 percent, or 0.05 pence, at 2.95 pence. The stock lost 89 percent last year and has dropped another 19 percent so far this month.

--Editors: Alan Purkiss, Tim Farrand

To contact the reporter on this story: Katie Linsell in London at klinsell@bloomberg.net

To contact the editor responsible for this story: Colin Keatinge at ckeatinge@bloomberg.net -0- Jan/09/2012 16:54 GMT


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