High street music retailer HMV is confident it will be back in profit next year following a difficult trading period for the company.
This news will be welcomed by staff in HMV’s commercial properties who must have been fearing the worst after some analysts predicted the demise of the business which has been hit by online sales an illegal downloading.
There was once a time when every high street featured a choice of commercial properties selling records and CDs. Music fans could pick up the latest album from Madonna or Michael Jackson in one of the chains or browse the racks of their local independent for something a little different.
Today HMV is the last chain on the high street and the number of independent commercial properties in the UK market has fallen from 2,000 to just 300 in the past ten years.
This has been due to the dramatic changes to the ways we consume music and film which has had some forecasting the total disappearance of record stores.
HMV has struggled recently and amassed debts which currently stand at a reported £168 million. In an attempt to offset the fall in CD and DVD sales it has focused increasingly on new technologies, gadgets and accessories.
In the 17 weeks to the end of April sales in its commercial properties fell by 12.9% leading to an anticipated loss of £16 million in the financial year just ended.
However the collapse of rival Game offers some hope to the company despite the fact that a deal with a private equity firm has rescued 333 of Game’s commercial property outlets. HMV has also arrived at an agreement with its bankers to halve its debt over the next three years.
Alongside this, the company has renegotiated the deal with its suppliers and succeeded in extracting more favourable terms by taking advantage of the fact that it offers the only remaining shop window on the high street. In return for this Sony, Universal, EMI and Warner Brothers have all taken a 2.5% stake in the business.
This has allowed Chief Executive, Simon Fox to forecast that HMV will return to profits next year and to predict a figure of “at least £10 million.”
Speaking about his optimism over HMV’s future he said; “The last year has been difficult and challenging one for HMV and this will be reflected in our annual results.
“However we are confident that the actions we have taken will enable us to significantly improve our profit and cash generation in the year ahead.”
The announcement led to a 12% rise in the price of HMV shares. However this doesn’t disguise the fact that the price has fallen by 66% over the past year.
Other potentially good news for staff of HMV commercial property branches is the High Court ruling that ISPs must block access to file sharing site The Pirate Bay for breach of copyright. However, The Pirate Bay is now advising its users how to circumnavigate the block which will be implemented by all UK ISPs except BT which is still considering the implications of the ruling.
