STRUGGLING retailer HMV has “12 critical days” to pull in Christmas sales and avoid a breach of its banking agreements, its new boss warned today.
Chief executive Trevor Moore, who joined the 91-year-old company in September with a remit to return it to profit, admitted the chain had failed to start the key festive shopping season as he had hoped but said it could benefit from a last-minute rush to the shops.
Investors appeared unconvinced as its shares slumped a further 39 per cent to close at 2.49p, some 99 per cent below a 2005 high of 282p and giving it a market value of just £10.7 million. One analyst said HMV faced “potentially insurmountable structural issues”.
Moore said: “Christmas gets later every year, people are also in search of the promotional offer and being very careful about where they spend their money.
“There are still 12 critically important trading days until Christmas and being on the high street, if things do come late, is absolutely to our advantage because that’s where the footfall will be.”
He said Christmas Eve and the weekend immediately before would be “very important for the high street and very important for HMV”.
In half-year results, the group said weak market conditions had created “material uncertainties” for the business, exacerbated by a worse-than-expected start to the festive trading period in which the firm generates 60 per cent of its annual sales.
It said that would probably result in a breach of covenants with its banks
on its financial performance, which will next be reviewed at the end of January.
It is also unlikely to meet analysts’ expectations for its full-year results, the firm said.
Back in May, when former boss Simon Fox was still in charge, the group said it was looking for pre-tax profits of at least £10m for the current financial year. The latest results revealed that like-for-like sales had fallen 10.2 per cent in the 26 weeks to 27 October, although the firm narrowed its pre-tax loss to £36.1m, compared with £50.1m the previous year.
The dismal results come despite reports that HMV has received £40m in financial support from its suppliers in a bid to keep it going over the crucial festive period.
The group said that sales in the first half of the year were hit by a light release schedule, as suppliers held back on significant product launches due to the Olympics.
It managed to boost its share of the declining market by ramping up promotional offers, which helped it gain market share.
At the end of the period, the business claimed a 38 per cent share of the
“physical” music market and a 27 per cent share of the DVD and Blu-Ray
Moore said closing more stores or placing the business into administration was not “part of our plan”.
He added: “It’s been a tough first half but we’ve reduced losses and in a difficult market we’ve continued to grow share.”
Freddie George, retail analyst at
Seymour Pierce, said he was “unconvinced” that measures taken by the group were enough to “offset the
structural pressures on its core business of music, vision and gaming”.
Maintaining his “sell” recommendation on the shares, George added: “We continue to see HMV as a value trap with potentially insurmountable