After a further drop in house prices was announced this morning (this time it was Nationwide bemoaning a 0.9% fall in June), it’s good to hear that some people are still having a great year. Take HMV, a retailer that looked dead in the water not so long ago; this morning it said that profits last year jumped 25% to £57m, as new video games like Grand Theft Auto IV (where you go around beating people up and stealing cars) continued to fly off the shelves. Group sales were up 11% to £1.9bn. ‘One year into our transformation plan, we are ahead of where we expected to be,’ beamed CEO Simon Fox today.
He’s not kidding – and it’s our growing obsession with video games that has helped HMV revive its flagging fortunes. Sales of titles like GTA and Nintendo's new Wii Fit were up 60% last year, leaving HMV with an 8% share of the overall market. Consoles and games now account for more than a fifth of all HMV’s UK sales, up from 14% last year – and with a new second-hand games offering due to be launched soon, it will hope for more of the same in the coming year. Clearly nobody’s told gamers that there’s a credit crunch on.
There was more good news elsewhere. Sales at its 313 Waterstone’s book stores edged up 3% after a big customer service push, including the launch of a new loyalty card (which entitles shoppers to juicy extras like pre-publication copies of new books and author evenings). Its website offering of online sales and music downloads also enjoyed 40% growth, despite stiff competition. And back office cost-cutting measures also seem to be bearing fruit (albeit not as fast as some would like).
But the main focus has clearly been on ‘revitalising’ the stores, which until recently have been suffering from the rise of digital sales and heavy discounting from supermarkets. And it seems to have worked: a concerted promotional campaign, a new technology product range and a funky new store format (which includes website access and ‘multi-player gaming zones’) helped it boost music and DVD sales, even though the market as a whole was falling.
HMV is clearly not out of the woods yet – the popularity of digital downloads will only increase, and it’s going to be hard for any high street retailer to make any money out of books, DVDs and CDs (margins are pretty skinny as it is). Its shares plunged this morning as analysts fretted about the cost of its store upgrades and the overhaul of Waterstone's.
But with a clean bill of financial health (it’s now virtually debt-free after the sale of its Japanese arm) and a management team that seems to know what it’s doing, at least Britain’s biggest music retailer is finally on the right track...