High street names feel the pinch as Christmas sales tumble

Entertainment giant shuts 60 stores after dire results

HMV confirmed the City's worst fears of a dire Christmas yesterday by issuing a profits warning, revealing concerns over a key banking covenant test in April and unveiling plans to close 60 stores.

Its eponymous chain said it had taken a £20m hit from the recent "severe weather". But it also blamed a "weak" entertainment market for a 14.1 per cent slump in underlying sales in the UK and Ireland over the 10 weeks to 1 January.

Given the group's heavy reliance on Christmas trading, the calamitous update sent shares in HMV, which also owns the bookseller Waterstone's, down by 20 per cent yesterday to an all-time low of 26p.

It also dragged down shares in Game, the video game retailer, and Dixons Retail, the owner of Currys and PC World. HMV said its full-year pre-tax profits would now come in at the lower end of City guidance of between £46m and £60m, compared to the £74.2m delivered last year. The warning on profits is the latest blow for the group, which last month said its losses had nearly doubled to £41.3m for the half year to 23 October.

HMV is struggling to combat fierce competition from the supermarkets and internet specialists, such as Amazon and Play.com, selling DVDs and CDs, as well as from consumers downloading – both legally, and often illegally – the same entertainment products over the internet.

The group has diversified its revenue stream into cinema, live concerts, festivals and clothing recently but the changes are yet to have a substantial impact on its bottom line.

Total sales at HMV, which also has stores in Canada, Hong Kong and Singapore, fell by 13.3 per cent over the 10 weeks. Simon Fox, HMV Group's chief executive, said: "The pace of change in the markets in which we operate underlines the urgency with which we must continue to transform this business."

To slash its cost base, the company is to close 40 of its 285 HMV stores and 20 of its Waterstone's shops over the next year. A spokeswoman said the stores closed are located in major conurbations where there is already an HMV or Waterstone's shop.

"It is a rental cost reduction programme rather than a headcount reduction programme," she said.

Given its woes, HMV said it would be "tight" to meet a key covenant test under its bank facility in April relating to the ratio between its rent bill and earnings before interest, tax, depreciation and amortisation. But it expects the store closures to help it pass the test. The group also trumpeted an additional £10m of cost savings to be delivered in its next financial year. However, Andrew Wade at Numis Securities said: "With unabating structural pressures from new non-food grocery space and online competition, trading showing no sign of improvement and banking concerns now hanging over the business, we continue to [advise investors to] steer well clear."

John Stevenson, at Peel Hunt, said: "While short-term snow disruption is not a structural failing, we feel the market is changing at a faster rate than HMV." Total sales at the group fell by 9.1 per cent over the 10 weeks.

However, Waterstone's fared better than HMV. Sales fell by just 2.1 per cent over the 10 weeks and by just 0.2 per cent over the final five. The book chain was helped by Jamie Oliver's latest cookery tome, which it said was the "fastest-selling non-fiction book of all-time".

Mr Fox said: "Progress at Waterstone's this year has been pleasing, and we remain on track to meet our business and financial objectives for the end of the first year of our turnaround programme."

News
people

Actress sees off speculation about her appearance in an amazing way

Arts and Entertainment
Serge Pizzorno of Kasabian and Noel Fielding backstage at the Teenage Cancer Trust concerts
musicKasabian and Noel Fielding attack 'boring' musicians
News
peopleLynda Bellingham's tragic final Loose Women appearance moves audience to tears
Arts and Entertainment
The last great picture - Winner 'Black and White' and overall 'Wildlife Photographer of the Year'
art
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
'Right Here' singer Jess Glynne is nominated for Best Newcomer at the MOBO Awards 2014
musicExclusive: Jess Glynne hits out at 'ridiculous' criticism of white artists nominated for Mobo Awards
Voices
'Irritatingly Disneyfied': fashion vlogger Zoella
voices

Arts and Entertainment
Enid Blyton's Magic Faraway Tree is to be made into a series of films
film

Enid Blyton’s Magic Faraway Tree really is being made into a film

Arts and Entertainment
Separated at birth? Frank Sivero (left) claims The Simpsons based Mafia character Louie on his Goodfellas character
arts + entsFrank Sivero sues Simpsons studio over allegedly basing mobster character on Frank Carbone
News
Carl Bernstein (left) and Bob Woodward (right) with former 'Washington Post' executive editor Ben Bradlee
people

The Washington Post editor helped Bob Woodward and Carl Bernstein bring down President Nixon

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...

Trainee Recruitment Consultant Birmingham

£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

Trainee Recruitment Consultants

£20000 - £25000 per annum + OTE £Competitive: SThree: SThree Group and have be...

Helpdesk Analyst

£23000 per annum + pension and 22 days holiday: Ashdown Group: An established ...

Day In a Page

Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
12 best children's shoes

Perfect for leaf-kicking: 12 best children's shoes

Find footwear perfect to keep kids' feet protected this autumn
Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

Arsenal’s ray of light ready to shine again

Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

Moyes’ show of sensitivity thrown back in his face... by Ferguson

Manchester United legend tramples on successor who resisted criticising his inheritance
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Lonely Planet’s Best in Travel 2015

UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London