HMV pins revival hopes to gadget-led stores as sales slump 15%

Britain’s sole surviving national chain of music and DVD shops is pinning its hopes on a high-tech future after revealing a further slump in sales.

Retail experts yesterday warned it was make-or-break time for high street stalwart HMV as the 90-year-old group said like-for-like sales had plunged 15.1 per cent in the 18 weeks to 3 September.

The firm – famous for its Nipper the dog trademark – is grappling with waning demand for physical formats such as CDs and DVDs. It has issued four profit warnings this year as a downturn in consumer spending exacerbated the long-term challenges of intense competition from online specialists and digital downloading of music and books.

HMV chief executive Simon Fox vowed to press on with plans to overhaul the group’s technology offering.

He highlighted the early success of the first six “Fast Forward” stores – where up to a quarter of floor space is devoted to gadgets such as iPods, headphones, speaker docks and tablet computers.

Technology sales at those outlets, which include a branch at Edinburgh’s Ocean Terminal, are said to have more than doubled during the 18-week period.

Fox said that this month the group would continue to roll out these space changes at the majority of the retailer’s 150 stores. “Overall, our plans for the Christmas trading period are on track,” he added.

The overall fall in sales is higher than the 14.5 per cent slide recorded in the year to the end of April, but was broadly in line with City expectations.

Total retail sales in the first quarter, including the impact of 29 store closures, fell 21.8 per cent. Including the firm’s HMV Live business, total sales declined 19.4 per cent.

Freddie George, retail research analyst at brokerage Seymour Pierce, said the figures were in line with forecasts but “nevertheless remain very weak”.

He said the Fast Forward plans were “not strong enough to drive footfall and earnings” and maintained full-year profit forecasts of just £2 million.

The group’s new store format, which will be promoted under the “Play it, touch it, live it” strap- line, could be seen as risky as major consumer electronics retailers such as Currys owner Dixons Retail and Comet owner Kesa have struggled this year.

HMV, which also owns the scaled-down Fopp chain of stores with their emphasis on classic CDs and vinyl music, has sold the Waterstone’s book chain and its Canadian division to cut debt. In June, the group secured its immediate future through a £220m refinancing deal with its banks.

Arden Partners analyst Nick Bubb believes HMV will attempt a rights issue early next year. However, the retailer played down such a move. Fox said: “It is not on the table today. We do not have an equity story today.”

Shares in HMV were flat yesterday at 6.5p.