Suppliers deal boosts troubled HMV
Friday 20 January 2012
The future of ailing music and film retailer HMV was looking more secure today after suppliers including Universal Music came to its rescue.
The loss-making group, which owns around 250 stores in the UK, said it had signed better terms with key suppliers in a move which will ultimately help it shed around half of its £180 million debt pile over the next three years.
The deal is a sign that the music and film industry is willing to support high street retailers at a time when online shops provide intense competition and internet piracy damages trade.
The agreement was enough to persuade the banks - including taxpayer-backed Lloyds Banking Group - to amend existing loan agreements, giving the struggling group more financial headroom. Shares more than doubled following the announcement.
David Joseph, chairman of Universal Music in the UK, said: "HMV is a vital part of the UK music industry and we are delighted that the support of the film studios and music companies is helping to secure its future."
HMV said its suppliers will receive a 2.5% stake in the business as part of a "change in the nature" of their relationship.
HMV and Lloyds both said they were unable to comment further on the specific details of the deal due to reasons of confidentiality.
But the retailer said the new arrangement will have a "materially positive impact" on profits and cash flow, which will lead to a 50% reduction in net debt over the next three years.
Simon Fox, HMV chief executive, said: "It won't address the structural issues that remain but it gives us time to address them."
He added: "As a key part of this we remain committed to improving our specialist ranging and merchandising of music and DVD whilst also continuing to grow our sales in portable technology and further developing our online and digital offers."
As a separate issue, the bank did warn it expected full-year losses to be larger-than-expected at around £10 million.
The chain has felt the pressure of the consumer spending squeeze as cash-strapped customers turn to cheaper deals on the internet for music and film.
HMV, which recently sold bookseller Waterstone's and announced plans to sell its live music division, saw group like-for-like sales fall 9.7% in the nine weeks to December 31.
The group previously announced the closure of up to 40 stores in a bid to make millions of pounds of cost savings, with 15 shut in the first half of the year.
- 2 Man who held up 'hire me' sign at Waterloo station returns a year later with 'I'm hiring' sign
Rowan Atkinson to sell £10 million McLaren 'supercar' he crashed into a tree and a lamppost
UK weather: Snow to fall in the coming week with sub-zero temperatures to last until early February
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Warriors in ancient Iraq suffered Post-Traumatic Stress Disorder more than 3,000 years ago, say researchers
US blames Russia after rocket attacks in Ukraine kill at least 30
Nigel Farage: NHS might have to be replaced by private health insurance
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
British Muslim school children suffering a backlash of abuse following Paris attacks
George Galloway condemns 'racist, Islamophobic, hypocritical rag' Charlie Hebdo at freedom of speech rally
Islamic history is full of free thinkers - but recent attempts to suppress critical thought are verging on the absurd
iJobs Money & Business
£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...
£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...
£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...