HMV music and film chain to appoint administrator

 

Shoppers on London's Oxford Street give their views on HMV's troubles

Music and DVD chain HMV is to appoint an administrator, making it the latest casualty on the High Street and putting about 4,350 jobs at risk.

Deloitte will keep HMV's 239 stores in the UK and the Republic of Ireland open while it assesses the prospects for the business and seeks potential buyers.

Trading in HMV shares on the London Stock Exchange has been suspended, HMV said in a statement.

The firm said it would not be accepting gift vouchers or issuing any more.

HMV, which was started in 1921, has struggled against online retailing.

The company's troubles underline the gloom on the High Street and come after a string of high-profile failures, including the closure last week of camera retailer Jessops and the collapse of electrical goods chain Comet last year.

In its statement, HMV said: "The board regrets to announce that it has been unable to reach a position where it feels able to continue to trade outside of insolvency protection and in the circumstances therefore intends to file notice to appoint administrators to the company and certain of its subsidiaries with immediate effect."

Month-long sale

The statement continued that the board "understand that it is the intention of the administrators, once appointed, to continue to trade whilst they seek a purchaser for the business".

Analysis

For music fans, there is a certain painful inevitability about the news of HMV's downfall.

The writing has been on the wall for the chain since 2007, when it announced the first in a series of failed efforts to turn around its ailing business.

In the meantime, HMV has increasingly moved away from selling music, dabbling in gadget retail and other sectors while reducing its stock of CDs.

But whatever bad decisions it may have made, the fact is that no bricks-and-mortar record store group has successfully resisted the onslaught of digital music downloads.

After Zavvi and Woolworths in the UK, Tower and others in the US, and most recently, Virgin France across the Channel, the list of victims continues to lengthen.

The company has been in financial crisis for more than a year, and on 13 December warned that it faced a possible breach of bank loan agreements, sending its share price plummeting.

The retailer, whose first store was opened in London's Oxford Street in 1921, has faced intense competition from online retailers, digital downloads and supermarkets in recent years.

As its debts mounted, HMV sold off parts of the business, notably its live entertainment arm and the Waterstones book chain.

Last week, HMV announced a month-long sale with 25% off prices, sparking worries that the company needed to shift stock after poor Christmas trading. The Financial Times reported that the final straw came over the past few days when suppliers, including music labels and film companies, declined to help HMV with funding so that it could continue trading.

Chief executive Trevor Moore joined the firm last year from camera retailer Jessops, which has since closed.

Demise 'inevitable'

Start Quote

[HMV's] outlook looks considerably better than for other recently kaput store groups”

End Quote

Maureen Hinton, analyst from Verdict Research, said that HMV was slow off the mark when it came to digital sales.

"If it had gone online 10, 15 years ago, it's got a very strong brand name, it could have built up a real presence," she told the BBC. "But at the moment if we think online you just think Amazon."

Neil Saunders, the managing director of retail analyst Conlumino, said he felt the appointment of administrators at HMV "was always inevitable".

He said that although the HMV brand "certainly has some value" for potential buyers, the current business model was dead.

"The bottom line is that there is no real future for physical retail in the music sector," he said.

'Legacy business'

HMV

HMV's Nipper dog
  • Founded in 1921 with its first store on London's Oxford Street
  • Its trademark dog and gramophone image is taken from the 1898 oil painting, His Master's Voice, which features Nipper the dog listening to an early gramophone recording
  • Moved into live entertainment but started selling off its live venues last year, including the flagship Hammersmith Apollo in west London
  • Bought the Waterstones book chain in 1998 but sold it last year as its debts mounted

Andy Heath, chairman of UK Music and director of the record company Beggars Group, denied that HMV had been "slaughtered" by the internet, but did admit that the firm had been "wounded very badly".

"They haven't been in the right corporate shape to fight the competition of the internet in the way that they should be," he told the BBC Radio 4's Today programme.

"They've been operating under what is probably a bit of an archaic structure - there's probably too many stores, some of them are probably the wrong size, some of them are probably in the wrong place."

He added: "I think there is a place for a chain but I think the chain needs to be focused in a way that HMV was unable to be focused.

"HMV was a legacy business operating under different market circumstances 20 years ago and it found itself in a place with leases and so on where it was unable to be as agile as it needed to be to survive. But fundamentally there's a very decent business in there."

High Street 'holes'

HMV's demise is the latest blow for the UK High Street:

Matthew Hopkinson, from the Local Data Company, said the HMV development was particularly worrying for shopping centres.

"If you take it into account what we've seen in Jessops, all happening within one week, there are going to be some major holes in the High Street.

"And HMV particularly has some very large stores - and obviously over 60% of their stores sit within shopping centres. So shopping centres will be hardest hit."

 

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  • rate this
    0

    Comment number 85.

    I'm wondering if it isnt time (& i know this wont be popular) to introduce some kind of internet tax, because a lot of people browse things in shops then go & buy on line.

    if this continues there wont be any goods sold on the high street and a lot of people will be out of jobs.

    There has to be something to give back to shops to recognise the investment in bricks and mortar (and business rates).

  • rate this
    +11

    Comment number 84.

    @63
    "Waterstones is now selling Kindles and offering E-book downloads, so I'm sure it will survive"

    HMV bought Waterstones for £300M, and sold it for £53M - that's the kind of financial loss that goes far beyond poor trading conditions.

  • rate this
    0

    Comment number 83.

    The problem isn't just Amazon but the cherry-picking supermarkets who now sell greetings cards, TVs, photo-processing, and CDs/DVDs, making it harder for Clintons, Comet, Jessops, and HMV.
    We gain with cheaper prices on a limited range but lose if we want to look at a bigger or specialist range.

  • rate this
    0

    Comment number 82.

    The reason these shops are failing in the high street, is because they have not been in tune with the rest of the market... Jessops, to expensive, HMV to expensive, even comets prices where way to high. I knew it would not be long before this happened, however GAME will be next, Also why go shopping when you can buy online, CHEAPER upto 40% cheaper...

  • rate this
    0

    Comment number 81.

    I was also wondering whether it is another case of HMV (who I guess pay their corporation tax), being devoured by another great overseas monster (Amozon) who employ less people and famously don't pay much corporation tax.
    Anyone else see a donwside here?

  • rate this
    0

    Comment number 80.

    Don't think I've bought anything from there in over 10 years. And why would you when CD-Wow, Amazon, Play.com are usually at least 1/3rd cheaper. The one time I can remember going into one of their stores to look for a Christmas present (about 5 years ago) I was shocked at the length of the queue and walked out again.

  • rate this
    -7

    Comment number 79.

    Let's not forget that it is the consumer (that's you & me) who choose to buy online, and have helped consign HMV to its fate. Yes their costs were probably too high. But you can't buy elsewhere and then wring your hands and wish they were still there. But mainly it's the money Osborne is siphoning for his rich pals that's to blame - we are NOT all in this together.

  • rate this
    +1

    Comment number 78.

    Surely they only have themselves to blame but themselves for not reacting quickly enough to the direction the market is heading? HMV is an established brand in the UK, they should have released a Spotify/Lovefilm style service a long time ago but they missed the boat.

  • rate this
    +2

    Comment number 77.

    Our local HMV remains open for now, really feel for the staff, some who I remember being at Virgin/Zavvi before they closed. One thing that annoys me is that although remain open they will not accept gift cards.

  • rate this
    +1

    Comment number 76.

    HMV caused this themselves. They had the warnings about a year or so ago and haven't appeared to have done anything about. Had they not been greedy in their pricing policy (before Play.com etc) & shut down underperforming shops they could have reduced costs (with some job cuts) and been a competitive online trader. They've seen Woolworths & Game go under & still did nothing. I feel for the workers

  • rate this
    0

    Comment number 75.

    Natural selection at work; the high street will resemble what we want it to be.

    I save money by shopping online so that I have more to spend in the coffe shop.

  • rate this
    +1

    Comment number 74.

    Let's be honest we all saw this coming and it has been coming for a very long time. The only surprise here is that the company has lasted this long.

    When you charge over £10 for films that are 10-20 years old which can be bought for 3 quid at a supermarket or online then you have a big problem.

  • rate this
    0

    Comment number 73.

    Let us not forget that HMV was a commercial business and responsible for it's own business management.

    The commercial landscape has been changing for just about everything over the last 10 years.

    Those businesses that have adapted or been built on that landscape will survive.

    Lets not be too sympathetic for a retailer that grossly overcharged for what you can buy cheaper elsewhere !

  • rate this
    +23

    Comment number 72.

    It's not far short of criminal that HMV aren't going to honour the gift vouchers that people have been given for Christmas etc. They've got our money and they're going to keep it. How honourable!

  • rate this
    +1

    Comment number 71.

    I was told that HMV were going to fail last June!. I was at a street party for the Queens Jubilee, and got talking to one of my neighbours who is a Manager at HMV. Whilst chatting about work, he told me how much trouble they were in.
    He said " If you have any vouchers, then spend them sooner rather than later". As I say, that was back in June

  • rate this
    +10

    Comment number 70.

    @1 Amazon are cheaper because they have a model that is cost efficient regardless of corporation tax. Whilst i dont agree with their tax dodge i am not going to spend an extra £5 on a DVD just because its HMV, add to that the cost of parking and petrol to get to the store (or public transport) and that DVD costs an extra £9.

  • rate this
    0

    Comment number 69.

    @ 45

    Well there's usually link to book a courier, which turns up next day or which ever day you want at work. Print out the return label - you don't need to go to the post office, or a shop. Blockbusters will face the same fate, when was the last time people actually rented a DVD?

    Digital sales and downloads now make more money than high street shops.

  • rate this
    +3

    Comment number 68.

    This is an example of a structural failure rather than a casualty of the economy.
    HMV's business model is now obsolete. The company should have closed stores and focused their brand online in the digital age.
    I still think HMV is a viable brand if someone bought the company and totally changed their business model.

  • rate this
    +1

    Comment number 67.

    Personally I like the interaction with staff & I like browsing so I'll be sad if they go. Yes this could be an evolutionary step in retail & there will still be competition online if not on the street. So what about jobs? How many of us at a young age did part time work in high street shops? Is it easy to return something that's damaged or broken to online stores? It's not so black & white.

  • rate this
    +6

    Comment number 66.

    #50 and all the other smug "Amazon pay less tax"
    No they don't
    HMV pay almost no taxes because they were making a loss for years.
    VAT is paid by the end consumer, not the business.
    VAT is 20% so even accounting for this why is HMV 50% more than Amazon? And Still not paying tax? Amazon actually does pay some tax, more than HMV!

    Educate yourselves!

 

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