A fairly positive results statement from HMV today: the retailer, which has had its fair share of problems in recent years, posted record sales (as in unprecedented, not LPs) of £2bn and a 17% jump in profits. Its much-admired CEO, Simon Fox, said his turnaround strategy for HMV was bearing fruit – new products and live music both made significant contributions this year, while even the struggling Waterstone's seems to be on the up. Although sceptics will point out that like-for-like sales were still well down, both at HMV and Waterstone's...
Let's start with the good stuff: group sales were up 3% to top the £2bn mark and pre-tax profit jumped from £63m last year to £74m this time round. That suggests the 'three pillars' of Fox's turnaround strategy, which is intended to 'evolve [HMV's] product mix' (he used to work in marketing, you know), appear to be having the desired effect. New stuff like technology products, fashion and mobile phones contributed about £166m in sales. Its £46m acquisition of concert provider MAMA Group has given it a foothold in the fast-growing live music space, while it also bought a 50% stake in 7digital to bolster its music and book download offering.
Speaking of which, the big problem for HMV and Fox in the last year has been its high street book chain, Waterstone's. Fox replaced the MD after a disappointing Christmas – and said it has now sorted out the problems with its supply chain and is taking the fight to Amazon et al. For instance, he's devolved more power to stores to arrange their own promotions based on local preferences, rather than dictating everything centrally – that's something that an online retailer can't easily do. Downloads are also selling well and he's expecting e-book-related stuff to make up a bigger proportion of revenues in the coming months. So perhaps there's still hope for Waterstone's after all.
All of these moves – broadening the product mix, expanding into live music, trying to differentiate itself from online retailers – make a lot of strategic sense. But we shouldn't underestimate just how tough a market HMV is operating in. So many people now buy their books, music and games online and it's hard to see that trend reversing. Here's a sobering stat: like-for-like sales were still down 4.2% for the group as a whole, and that's not just Waterstone's fault – HMV UK was also down 2.4%. Things are improving, but there's still a long way to go.
In today's bulletin:
'Massive spending cuts lead to massive job cuts' shock
HMV sees profits jump after mixing it up
Tesco slammed over advertising - and accounting
Well-oiled rogue trader gets £72,000 fine from FSA
The Sharp End: High on his own supply