HMV is once again fighting for survival after a fresh collapse in demand for CDs, games and DVDs over the summer set the high street specialist on a perilous course that could mean it breaches the terms of its bank loans early in the new year.
Revealing a first-half loss of £36.1m, its chief executive, Trevor Moore, said tough trading conditions meant there were “material uncertainties facing the business”. He insisted closing stores or putting the retailer in administration was not currently “part of our plan” but said he was seeking to cut running costs. “I joined the group because I believe it has a strong future,” he said. “If I thought we had tried everything I would not have joined.”
HMV, famous for its Nipper the dog mascot, banks all its profit at Christmas. Analysts had previously pencilled in £10m for this year but Moore said dire summer sales meant its performance would now fall short of City estimates. Like-for-like sales slumped 10% in the six months to 27 October after suppliers held back new titles for fear they would be overlooked as the nation focused on a summer of sport. The warning sent HMV’s shares into freefall, closing down nearly 40%, at 2.49p, giving the retailer a stock market value of around £10m.
The retailer, which remains burdened with a £176m debt despite having sold off the Waterstones chain and its live music venues to raise cash, said it was “probable” it would breach its banking covenants when they were tested in January.
A breach would put the banks in the driving seat and could result in their calling in their loans. The company said it would be able to meet a £30m payment due then and had “adequate resources to continue in operational existence for the foreseeable future”, adding it was “currently operating within” the terms of its £220m banking facility.