No tablets, more music and film: Hilco's vision to resurrect HMV

Restructuring firm hopes to challenge iTunes' dominance of digital market

James Thompson
Saturday 06 April 2013 01:23
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Hilco’s acquisition of HMV will save 2,643 jobs
Hilco’s acquisition of HMV will save 2,643 jobs

HMV, the UK's last independent music chain, is to break from its previous strategy of selling tablets and other technology devices after it was bought by Hilco out of administration.

The restructuring firm yesterday ended months of speculation by acquiring the HMV brand, website and 141 stores in a deal worth about £50m, and promptly vowed to restore the retailer to its heritage as a music and film specialist.

The acquisition saves 2,643 jobs, although 81 stores will close with the loss of more than 1,000 roles.

Hilco has parachuted in Ian Topping – the former head of Steinhoff UK, the owner of the Harveys and Bensons for Beds chains – as chief executive, and he said: "We intend to reverse the earlier decisions to sell tablets and other devices in the stores and to reclaim the space for an enhanced music and visual range."

The restructuring specialist says it has turned around HMV Canada since it acquired the business at a knock-down price in 2011 from the British entertainment group. But it faces a much stiffer task to return the UK operation to its former glory after it collapsed under debts of £176.1m and spiralling losses, hiring the accountancy firm Deloitte as administrator in January.

Paul McGowan, the UK chief executive of Hilco who has become HMV's chairman, said: "We hope to replicate some of the success we have had in the Canadian market with the HMV Canada business, which we acquired almost two years ago and which is now trading strongly."

He added: "The structural differences in the markets and the higher level of competition in the UK will prove additional challenges for the UK business, but we believe it has a successful future ahead of it."

In contrast to the UK, broadband penetration is much lower outside the big cities in Canada, and Amazon is nowhere near the force it is in the UK, largely due to the huge size of the North American country.

Amazon increased its share of the UK entertainment market by 3.1 per cent to 23.4 per cent over the 12 weeks to 23 December, according to Kantar Worldpanel, compared with HMV growing by just 0.2 per cent to 17.5 per cent.

Laurie Krohn, a consumer analyst at Kantar Worldpanel, said: "Music downloads now account for 40 per cent of total sales by value, up from 33 per cent last year. iTunes is the dominant force in digital music, and HMV will need to challenge this supremacy if it wants to succeed in the long term."

But Hilco has forged deep relationships with many of the same music and DVD suppliers, while its prospects of turning around HMV in the UK will have been hugely improved by it exiting struggling stores, renegotiating rents with landlords and shedding its debt mountain.

Hilco owns Denby Pottery, previously ran the now-defunct book chain Borders UK, and has advised on many of the high street's most-distressed situations, from Woolworths to Peacocks, over the last decade.

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