HMV Group Sales Suffer In The Cold

5 January 2011

HMV Group, the entertainment retailer, reported that its like-for-like sales fell 13.6% in the last 5 weeks.

In a statement the company said that it had experienced, "challenging entertainment markets, combined with the severe weather over the peak trading period". HMV Group admit that it was not just the weather but also a fall in demand for CDs, DVDs and Games, that impacted sales.

HMV Group said that it would be taking "aggressive action" to lower its costs and it expects to close in the region of 10% of its retail stores.

Several hundred jobs will be cut across the group with the closing of 40 HMV and 20 Waterstone's stores.

The firm also said in its trading statement - which was issued a week earlier than planned - that it was struggling to avoid breaching the terms of a bank loan. The banks again are the important players in the fate of the group. The bank has the power, as a secured creditor, to appoint administrators if it feels it is in the bank's best interest. It sounds as if HMV are taking drastic action which should hopefully avoid this scenario. Of course, some retailers such as Blacks Leisure have used a CVA as an alternative to administration. Blacks Leisure is now trading very well with sales UP 10.2% in December, and is attracting the interest of buyers.

Another retailer, Next, saw retail sales drop 3.1% between 1 August and 24 December.

In its trading statement it said it was hit by the extreme weather conditions and increased competitor discounting on the high street before Christmas.

"We estimate we lost £22m of full price sales as a result of the snow representing 2.2% of the season's total sales," it added.

In essence the health of the UK retail industry is always keenly watched by economists as consumer spending is such a driving force in our economy. The government will be watching retail sales closely to assess the impact of the VAT rise. This is not expected to have much of an effect yet as many retailers have said they will not put the price up of existing lines and stock.