HMV might have announced a new business model focusing on technology, but even that hasn’t been enough for the beleaguered music chain to keep a grip on sliding sales.
Like-for-like sales dropped by 15.1% in the three months to the beginning of September. Total retail sales, taking into account the 29 store closures, fell 21.8%. And for the HMV group as a whole, which includes the concert business HMV Live, sales fell 19.4%. All in all, not a great set of results but was in line with analyst expectations.
The slump comes despite a business restructuring to move away from the reliance on CDs and DVDs. Music sales have been steadily slipping in the face of growing competition from digital downloading and supermarkets, and a losing battle with piracy. HMV’s plan has been to focus on technology - promoting more gadgets such as iPods, headphones and speakers - but even that hasn’t been enough to recover the group’s earnings so far.
The lacklustre results follow a tumultuous year for the retailer, in which it only just avoided calling in the administrators after being thrown a £220m lifeline by the banks in June. This may have secured its short-term future, but spiralling debts meant HMV was forced to sell its Canadian arm and the Waterstone’s book chain.
On the other hand, the retailer is hoping the group’s fortunes can be turned around by the focus on gadgets. HMV’s chief exec Simon Fox said the first six ‘Fast Forward’ stores - where 25% of floor space is devoted to gadgets - recorded a doubling in like-for-like sales in the 18 weeks to September 3. The layout will now be applied to the majority of the retailer’s 150 stores.
Even so, it’s uncertain whether the format will be successful enough to drive up profits significantly. HMV is likely to face strong competition from online retailers such as Amazon, which offers gadgets at a discounted price and already has a strong market presence. Furthermore, you only have to look at the struggling Dixons chain to see that consumer electronic retailers aren’t exactly booming at the moment.
HMV might have changed the track, but it's a long and winding road before sales volumes return to previous levels.