HMV is making sweet profitable music again

The retailer may be coming back from the brink, making almost £17m in operating profits in the 11 months after going under.

by Rachel Savage
Last Updated: 16 Jan 2015

Everyone loves a comeback story and HMV seems to be duly obliging. After falling into administration last year, the entertainment retailer made nearly £17m in operating profits in the 11 months after it collapsed.

And despite having suffered from competition from online giants Amazon and Apple, every single one of HMV’s bricks and mortar stores is now profitable, owner Hilco said, according to the Telegraph.

The high street chain and its 223 stores went under in January 2013, weighed under by £170m of debt. Hilco stepped in three months later, saving 140 shops and stopping selling online.

Its flagship 60,000 square foot Oxford Street store was sold to Sports Direct in January this year, as HMV shifted back to 363 Oxford Street, where it first started out in 1921 – a PR-friendly and cost-saving move.

But the company also had a series of one-off costs, including £10m in intercompany charges, £4m of restructuring costs and £2.3m in interest on loans from Hilco, and it's not clear whether its owner is taking cash out of the company and whether they are actually one-offs or just a classic accounting trick. That meant HMV actually posted a pre-tax loss of £4.8m, according to company’s accounts due to be filed at Companies House later.

The retailer has pulled back in punters with in-store gigs and special film events, with studios and record labels keen to help out in a bid to stop Amazon and the big supermarkets becoming too powerful and forcing prices down even further.

And it's not the first recent good news for HMV either. Earlier this month it said same-store sales had risen 13.8% in the last two months. And in August, figures from Kantar Worldpanel showed it had reclaimed second place in the UK entertainment retail market from the supermarkets, with 14.7% of the market compared to Amazon’s 21.8%.

Paul McGowan, HMV’s executive chairman and Hilco’s chief exec, was bullish enough to say then it was ‘only a matter of time before we overtake Amazon’. That’s a headline-friendly soundbite, but HMV at least looks like it isn't rolling over and taking the challenge lying down.

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