HMV year in balance as freeze hits sales

Music, games and DVD retailer HMV yesterday warned its full-year outcome was hanging in the balance after the start of the all-important Christmas trading period was hit by snow.

The 89-year-old group, which trades from more than 730 HMV, Fopp and Waterstone's stores, said so-called customer footfall in shops had been "significantly" affected by the freeze of the past two weeks, coming at the start of its key festive season.

The firm generates 60 per cent of sales throughout Christmas and the final four months of its year and is hoping to make up for difficult conditions in the first half.

Results yesterday showed pre-tax losses widening to 41.3 million in the six months to 23 October from 24.9m a year earlier after HMV UK and Ireland sales slumped 16.1 per cent. The company halved its interim dividend to 0.9p a share.

HMV said its sales plunged amid a "weak entertainment market", with games impacted particularly badly and as the World Cup slowed the pipeline of new releases earlier in the year.

But the group's woes were compounded by mounting competition for music and DVD sales from supermarkets, which has forced it into heavy discounting.

While it noted more encouraging trading at the start of the second half, progress was hampered by the recent severe weather conditions.

"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," said HMV.

It is pinning Christmas hopes on a line-up that includes Take That and Cheryl Cole albums, DVD releases such as Toy Story 3 and Shrek 4, and new games Call of Duty: Black Ops and FIFA 11.

But chief executive Simon Fox said the group would have to step up turnaround efforts for its HMV chain.

The group is branching into new areas such as technology sales, as well as entertainment-related products.

Under a recovery plan led by Fox, HMV has pushed into fashion, mobile phones and Blu-ray equipment, while its swoop for festivals and gig venue owner Mama Group cemented its position in the fast-growing live market.

Fox said: "Our sales performance during the first half leads us to conclude that we must accelerate HMV's product mix evolution, with a particular focus on technology, where the opportunity for range expansion in high-growth products is greatest."

Operating losses at HMV UK & Ireland more than trebled to 24.3m from 6.7m a year earlier. However, the group said its revival plans at Waterstone's were on track as half-year operating losses improved to 9.9m from 12.9m.