HMV sales slump as competition increases

Music store and bookshop owner HMV reported plummeting sales today as it continued to struggle to compete with supermarkets and the internet.

The retailer said like-for-like sales at its music stores were down 17% in the nine weeks to July 1 while they fell 6% at its Waterstone’s bookshops.

The update came as it posted a 6% fall in like-for-like sales across the group for the year to April 29 – sending pre-tax profits down 21% to £98.2m (€141.56m).

HMV today said it will introduce price cuts in its music stores by September this year and ramp up its online business as it looks to improve sales.

It also said it expected to make cost savings of £10m (€14.42m) from the acquisition of bookshop Ottakar’s, which it agreed to buy for almost £63m (€90.82m) in May.

HMV chief executive Alan Giles said: “As we expected, trading conditions in the first few weeks of the new financial year have remained difficult.

“However, we are making excellent progress with a two-year programme of initiatives which we anticipate will begin to improve performance during the crucial Christmas trading period and ultimately transform the group into a world class multi-channel retailer.”

HMV said that, despite the "challenging conditions'', it will raise its annual dividend by almost 9% to 7.4p a share and return up to £100m (€144.16m) to shareholders in the next two years through share buybacks.

Operationally, the group unveiled plans to roll out a new store format which it had been piloting at HMV in South Wales and Kingston upon Thames.

The new format revolves around a simpler store layout and major price cuts, which has seen the price of chart CDs slashed to £9.95 (€14.34), while DVDs have been reduced to £14.95 (€21.55m).

Shares in HMV have fallen 28% since July 2005 and dipped a further 3% to 168.25p today - well below the 210p-a-share approach from private equity firm Permira it rejected earlier this year.

HMV has also fended off an approach for Waterstone’s from the bookshop’s founder Tim Waterstone.