HMV Group has posted a worse-than-expected first-half loss of more than £40m after sales plummeted at its high street entertainment chain, as the heavy snow of the last two weeks "significantly undermined" its start to the crucial Christmas trading period.
Simon Fox, the chief executive of HMV, which also owns Waterstone's, put on a brave face by saying the next four weeks would "largely determine" its full-year profits, touting a strong line-up of music, films, books and computer games for Christmas.
But the performance spooked the City and HMV's shares sank by 7.25p, or 17 per cent, to 36.5p – the lowest since its flotation in 2002.
Under Mr Fox, HMV has diversified its revenues over the past year into areas, notably live concerts and festivals and clothing, but progress appears to have been too sluggish for investors and City analysts.
Keith Bowman, an analyst at Hargreaves Lansdown Stockbrokers, said: "These results do little to ease fears that HMV is slowly being consigned to the history books."
Pre-tax losses at HMV nearly doubled to £41.3m over the 26 weeks to 23 October, compared with a loss of £24.9m last year. The main drivers of this deficit were tanking sales of CDs, DVDs and computer games at HMV in the UK and Ireland, which led to a 16.1 per cent slump in the chain's like-for-like sales over the half-year.
Mr Fox said: "The increased loss reflects the tough trading conditions in HMV UK, where progress in growing new product categories was not sufficient to offset weak entertainment markets."
More specifically, HMV UK said the "the most challenging market" was computer games, with sales down by 12 per cent, following a 30 per cent fall in the sector last year.
The group's performance at Waterstone's was much better, but the book chain's underlying sales still fell by 3.2 per cent, which contributed to a £9.9m operating loss at the unit.
Waterstone's is trying to tailor its book offer more to local customers, having overhauled its distribution network into stores last year.
Mr Fox said: "In Waterstone's, the recovery plan is on track." Citing a "strong line-up of offers" for Christmas, HMV has high hopes for sales of Take That and Cheryl Cole's albums, Kinect for Xbox 360 and Call of Duty: Black Ops games, and books by Jamie Oliver and Stephen Fry.
But Mr Fox said the weather had taken its toll on early festive trading, with customers struggling to get to its shops in badly affected areas, such as Scotland.
He said: "Despite more encouraging trading at the beginning of the second half, the start to the Christmas trading period has been undermined by the severe weather of the last two weeks, which has significantly affected consumer footfall and consequently makes trading patterns hard to determine at this stage."
Total sales at HMV fell by 6 per cent to £749.5m.