HMV warns it faces battle to stay in business

ENTERTAINMENT RETAILER HMV, grappling with waning demand in its core CD and DVD markets, posted wider first-half losses and warned it faces a battle to stay in business.

The 90-year-old group said yesterday it had adequate resources to continue trading for the foreseeable future.

“However, the economic environment and trading circumstances create material uncertainties which may cast significant doubt on the group’s ability to continue as a going concern in the future,” the retailer said.

HMV, which employs 4,500 staff, said it was maintaining “regular and constructive discussions” with its banks and had started a strategic review of its HMV Live division, which may lead to its sale.

The group, which has issued four profit warnings this year, made an underlying pretax loss of £36.4 million (€43.4 million) in the 26 weeks to October 29th, compared to a loss of £27.4 million in the same period last year.

The firm has suffered as the downturn in consumer spending exacerbated the long-term challenges of intense competition from supermarkets and internet retailers, as well as the increasing popularity of digital downloading.

Total sales slumped by 17.6 per cent to £364.9 million, with sales at stores open more than a year down 11.6 per cent.

HMV said like-for-like sales were down 13.2 per cent in the seven weeks to December 17th.

The firm has been shifting its emphasis from CDs and DVDs to the growth markets of entertainment-related technology products such as MP3 players, headphones, speaker docks and tablet computers, as well as live music and event ticketing.

HMV ended the first half with net debt of £163.7 million.

In June, the group secured its future, at least in the short term, with a £220 million refinancing deal with banks. It has also sold the Waterstone’s book chain and a Canadian arm to cut debt. Two of the group’s Waterstone’s stores in Dublin have closed.

HMV has 16 shops in the Republic and 11 in the North.

Shares in HMV, which have lost 88 per cent of their value over the past year, closed last Friday at 3.87p, valuing the business at £16.4 million. – (Reuters)