Snow-hit HMV to close 60 stores

Music and books retailer HMV Group has revealed a raft of cost-cutting measures – including store closures and redundancies – as it battles with tumbling sales.

The group will close 60 stores over the next 12 months after it reported a 13.6% slump in HMV’s like-for-like sales in UK and Ireland in the five weeks to January 1 and revealed it was struggling to meet the terms of a bank loan.

Shares plummeted 24% after the company, which has some 600 HMV and Waterstone’s stores in the UK, warned profits for the year to April would be near the bottom of the current range of City forecasts.

David Jeary, a retail analyst at Investec Securities, said the company failed to improve UK sales despite easier comparatives with a year ago. He added: “While adverse weather undoubtedly was unhelpful to the business in the UK, the core HMV division remains under considerable stress as a format and this must raise questions over its long-term future.”

As well as the disruption caused by snow and ice before Christmas, HMV said its core entertainment markets remained weak and underlined the urgency with which it needed to carry out its turnaround strategy, which focuses on broadening the product mix.

It pledged aggressive action on costs and said it would close 60 stores across its UK businesses over the next 12 months and seek a further £10 million a year of cost savings. Some closures will include lapsed leases and stores in locations where there is more than one outlet.

The group confirmed there would be redundancies, but the number of job losses had not been determined. A number of staff will be offered positions in other stores.

HMV admitted it is facing a battle to meet a test on its bank covenants in April, which is linked to its rental bill.

But a spokeswoman for the group said HMV was still confident over its long-term future and believed the cost-cutting measures would help it meet the bank covenant test. She said the turnaround strategy was working, with strong sales in its live music division and in technology products, which were up 20% in the period.

Waterstone’s also showed improved sales, with a 0.4% drop on a like-for-like basis in the five weeks to January 1.