Troubled commercial property retailer HMV has reported a stark fall in sales for the Christmas period but noted a slowing in the weakening of its music and film business.
Like-for-like sales, which remove the effect of shop closures, fell 8.1 per cent over the five weeks to 31 December 2011 which was a recovering “trajectory” said Chief Executive Simon Fox. Total sales were down 16.6 per cent.
The commercial property group echoed concerns about its capability to trade in its current form.
Separately, research suggests 2011 saw a big jump in the amount of commercial property retailers going into administration. According to consultancy firm Deloitte, 183 commercial property retailers went into administration in England and Wales last year, 11 per cent more than in 2010.
Technology
Commercial property music retailer HMV, which is the country’s last national music chain, with 252 stores, is hobbled by £160m of debt. Poor trading throughout 2011 meant the sale of Waterstones for £53m failed to solve its lucrative live music division, which runs 13 venues and a number of festivals, up for sale.
The music retailer would give no update on the sale of HMV Live with no deadline set for bids, though Sony, Warner Music and private equity firm Exponent have been suggested as potential buyers.
Like-for-like sales from the end of November 2011 at this part of the business were down by 1 per cent against a year previously, compared with a fall of 8.2 per cent at HMV’s commercial retail business.
Nevertheless, HMV said that there were signs that its efforts to refocus on technology products were beginning to pay off. Chief executive Simon Fox stated: “The continuing actions to focus the business and to expand our technology offering are beginning to show through.”
Like-for-like sales in technology products at the 144 stores over the five week period were up 51 per cent. speaking of the sales, Mr Fox further added: “We are seeing a combination of a slowing of the decline in music and film, and acceleration in the growth of technology. Undoubtedly trading conditions and the consumer environment remain challenging, but we remain confident in HMV’s future prospects.”
Store Conversions
12 per cent of HMV sales are now technology products, from a standing start three years ago. It wants this to increase to 30 per cent over the next three years.
Commercial property retailer HMV is attempting to refocus its business by offering more technology products, such as headphones, tablet computers and MP3 players, as well as live music and event ticketing.
The business has said it believes the impact of the store refits to be shown in its next set of results, as the work to convert stores took place towards the end of 2011.
On the other hand, analysts have questioned whether this approach will be enough to turn HMV’s fortunes around.
Research director at Planet Retail, Matthew Stych, told the BBC: “There are far too many electronic retailers on the High Street and I don’t see [the push towards technology products] as a massive differentiator or a long-term sales driver.”
Margin Pressure
Commercial property retailers Hawkins Bazaar and Barratts shoes both entered administration last month. Deloitte added that the tough trading conditions on the High Street were likely to continue into 2012.
Lee Manning at Deloitte said: “Many retailers would have been banking on the busy Christmas period to give them a much needed sales uplift, but retailers were forced into discounting at levels last seen in the aftermath of the collapse of Lehman Brothers, putting severe pressure on margins.”
Although the number of commercial property retailers going into administration in 2011 rose, Deloitte said that the total number of commercial property companies that went into administration in England and Wales fell to 2,010, down from 2,086 in 2010.
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