HMV's success in selling Waterstone's for more than expected may not be enough to save the company, analysts warned yesterday.
The retailer's announcement that it has sold the bookstore for £53m to the Russian billionaire Alexander Mamut was accompanied by a miserable trading update that suggests its problems are far from over.
Sales in HMV's UK and Ireland stores fell by just over 15 per cent during the first four months of the year, the company revealed, warning that it now expects to make a profit this year of just £28.5m, down from its previous estimate of £30m. In addition, the company's debts have jumped from £130m to £170m.
Nick Bubb, a retail analyst at Arden Partners, said: "HMV is still not out of trouble: the cash offer for Waterstone's is better than expected, but the debt position is way higher – given the drop in trading, it will not be easy to convince shareholders to raise equity."
Nevertheless, the Waterstone's deal does appear to have bought HMV some time. The proceeds of the sale will be used to pay some of the retailer's debt, but it is now confident it can agree new banking terms with its lenders within the next few weeks. It is then expected to explore a rights issue to raise new funds.
Simon Fox, HMV's chief executive, hopes this breathing space will give him enough time to show that the retailer's new focus on sales of entertainment technology can transform its fortunes. The retailer said sales at the six shops it has overhauled so far were markedly better than elsewhere in the chain, though even these landmark stores saw only flat trading.