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Monday, 19 December 2011

HMV faces a difficult 2012

HMV group have announced a further sharp fall in profits that has seen its shares fall again.  The business has been struggling in the face of increased competition from the internet and the supermarkets.
HMV, which have lost 87pc of their value over the 12 months, fell 5pc to 3.68p in early trading on Monday.  The company has said that it may sell its live music business to raise funds.  The banks have been supportive and lent a further £220m in June to keep the company going.  The banks have also been supportive of Thomas Cook lending them a further £200m.  The question is how long can the company hold on.

The management have appeared to have taken on board the seriousness of their situation and have tried to adapt with sell offs, refits and store closures.  Their new store format, which is being rolled out, where they sell more hardware such as MP3 players, headphones etc has been a big success with sales up 42%.  As such, they could still turnaround the business as it has a much loved brand.

Another factor in their favour is over half of their 725 stores have leases expiring in the next 5 years. So if they can hold on they should be able to drive a hard bargain with their landlords.

A CVA could be an option and the company said earlier in the year that it was not ruling it out.

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