And another giant stumbles ....
ONE of the biggest names on the high street, HMV, the music and film retailer, is to go into administration, putting more than 4,000 jobs at risk, it was announced last night.
In a statement, the company, which has almost 240 stores across the UK and Ireland, and live venues, including the HMV Picture House in Edinburgh, said the decision to cease trading had been taken “as a result of current market trading conditions” and the probability “it would not comply with its banking covenants at the end of January 2013”.
Deloitte, the accountancy giant appointed as administrator, will run the 239 stores while it assesses HMV’s financial situation and seeks a potential buyer for the business.
Trading in HMV shares on the London Stock Exchange was being suspended with immediate effect, the company said.
The statement read: “The board regrets to announce that it has been unable to reach a position where it feels able to continue to trade outside of insolvency protection, and in the circumstances therefore intends to file notice to appoint administrators to the company and certain of its subsidiaries with immediate effect.
“The directors of the company understand that it is the intention of the administrators, once appointed, to continue to trade whilst they seek a purchaser for the business.”
The 90-year-old high street retailer is the latest victim of the economic downturn, which has already seen the collapse of two major retailers – Jessops camera chain last week and the Comet electrical chain last month.
The entertainment chain has been struggling with debts for two years and has been facing increasingly tough competition from customers buying music and films online.
But retail experts said it had not reacted quickly enough to the move towards the digital revolution of the music industry.
While it diversified into areas such as live venues and consumer electronics, it failed to keep its core customer market.
In the run-up to Christmas, Trevor Moore, HMV’s chief executive, warned the entertainment group was in trouble as he revealed it was in talks with banks over its future following worse-than-expected trading.
Mr Moore, who joined the chain from Jessops, said market conditions suggested the group would fail to meet expectations for the year to April, so would not meet the terms of its bank loans.
HMV said like-for-like sales fell 10.2 per cent in the 26 weeks to 27 October last year, as its pre-tax loss narrowed to £36.1 million, compared with £50.1m the previous year.
Shares tumbled 39 per cent after the dismal results were published, giving the retailer a market value of just £10.1m.
Its struggle has seen it sell off several parts of its business, including the Waterstones book retailer, to reduce its debt pile, while closing loss-making stores.
Neil Saunders, the managing director of retail analyst firm Conlumino, said: “Although there is a sense of poignancy over the potential administration of HMV, this outcome was always inevitable.
“While many failures of recent times have been, at least in part, driven by the economy, HMV’s reported demise is a structural failure.”
He added: “In the digital era where 73.4 per cent of music and film are downloaded, HMV’s business model has simply become increasingly irrelevant and unsustainable.
The Scotsman
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