HMV shares dive as stores to shut

HMV said the entertainment market remained weak

Shares in music and books retailer HMV Group have fallen 24% after revealing falling sales, weak profits and trouble meeting the terms of a bank loan.

The firm – which also owns Waterstone’s bookshops – plans to close 60 stores in the next 12 months in order to get costs under control.

It said Christmas sales were down 10%, and warned profits would be at the lower end of forecasts.

Business was hit by the severe weather and “challenging trading conditions”.

Like-for-like sales for the crucial five weeks to 1 January were down 10.2% on last year, due to a 13.6% slump at its HMV music stores in the UK and Irish Republic.

HMV’s share price has declined steadily throughout 2010, and the latest drop brings its cumulative fall to 78% over the last 13 months.

HMV GroupLast Updated at 05 Jan 2011, 05:23 ET *Chart shows local time price change %24.75 p–

-7.75

–

-23.85

The firm also said in its trading statement – which was issued a week earlier than planned – that it was struggling to avoid breaching the terms of a bank loan.

“The board now expects that compliance with the April covenant test under the group’s bank facility will be tight and is taking further mitigating actions during the next four months to address this,” the company said.

As well as the store closures, HMV said it would implement other cost-cutting measures that would save it a further £10m per year.

It said profits for the year to April would be at the bottom end of the £46m-60m range expected by markets.

Although the company partly blamed the snow for the poor result, it conceded that underlying demand for its CDs, DVDs and games was weaker than hoped, and also pointed to “well-reported consumer headwinds as we enter 2011”.

“The pace of change in the markets in which we operate underlines the urgency with which we must continue to transform this business,” said the firm’s chief executive Simon Fox.

Meanwhile, sales at its Waterstone’s bookstores appeared to have stabilised, and were unchanged during the Christmas period compared with a year ago.

The company attributed this “pleasing” result to turnaround actions implemented last year.

Games Workshop GroupLast Updated at 05 Jan 2011, 03:53 ET *Chart shows local time price change %352.50 p–

-70.00

–

-16.57

Separately, fellow retailer Games Workshop also saw its share price dive as it faces tough trading conditions in the entertainment market.

Sales of its fantasy figurines and other products fell 4% in the six months to 28 November compared with a year earlier.

The company further warned that “difficult trading conditions since that time mean that this shortfall is unlikely to be recovered by the year end”.

As a result, the firm feared that profits for the year to May were unlikely to meet market expectations.

Shares in Games Workshop fell nearly 18% in early London trading.

This article is from the BBC News website. © British Broadcasting Corporation, The BBC is not responsible for the content of external internet sites.