HMV fading to black as sales plummet?

Shares in HMV Group nose-dived this morning, after the music retailer said UK like-for-like sales in the six months to the end of October dropped by just over 16%. As a result, pre-tax losses at the group, which also owns book retailer Waterstone’s, have swelled to £41.3m, up from £24.9m last year, while revenues dropped to £749.5m, down 6% from the year before. And things looked just as bleak abroad, where sales dropped by almost 9% (Canada fared worse, dropping 10.2%). It’s more bad news for the company, which has had a tough time in recent years. And since the figures only go up to the end of October, it can’t even blame its poor performance on the cold snap…

It looks like the company’s new strategy, which has involved frantically diversifying its offering to the point where it now not only sells music and DVDs but also games, books, electronics (including the iPad), and even clothes hasn’t quite had the desired effect. In fact, sales are down across the board: CDs have dropped by 10% while DVDs have dropped by 8% and video games – which the retailer clearly hoped would shore things up a bit – have dropped by 12%. Nor does the City seem terribly convinced by its new strategic direction: Verdict Research analyst Matt Pinner told Sky News this morning that the business is ‘haunted by the ghost of Woolworths’ – another famous high street name that tried to be all things to all men and succeeded only in going bust. Which, aside from being a great soundbite, strikes us as depressingly plausible.

In fact, the only part of the business that is looking reasonably strong is its foray into the live music market. HMV acquired 12 live music venues back in January when it bought the MAMA music group and it says that so far, the business has performed well. In September, it opened a new venue, the HMV Institute, in Birmingham, and it has plans to open another – the Ritz in Manchester – next year. Its festivals, which include Lovebox and Global Gathering, also did reasonably well. HMV has seemingly grasped what some in the music business realised a couple of years ago – that these days, live music is the only side of the entertainment industry left that still really pays. But is it too little, too late?

The figures only go up to the end of October, so we still don’t know a) what the effect of the cold snap has been on the business, and b) whether Christmas shoppers can make a difference. Apparently, Christmas trading tends to account for a whopping 60% of its full-year sales – so it could yet see things perk up by the end of the year. But with no end in sight to the freezing weather, the likelihood is that people would prefer to shop in the comfort of their own homes, where Amazon is offering hefty discounts on predicted best-sellers like Call of Duty: Black Ops and Cheryl Cole’s new album – incidentally, the same items that HMV says it hopes will bring the punters through its doors. Maybe HMV will be blessed by a Hollywood-style Christmas miracle. But at the moment, that looks increasingly unlikely.