HMV's dog tired, admits CEO

Is HMV becoming a broken record? Having issued four profit warnings already this year, the group has posted the kind of results this morning which could drain even Santa Claus himself of Christmas cheer. The company made an underlying pre-tax loss of £36.4m in the six months to the end of October – a steep rise from the £27.4m loss it made during the same period last year. Total sales fell by 17.6%, to £365m, and even during the Christmas period – the seven weeks to December 17 – things weren’t looking much better, with like-for-like sales dropping by 13.2%.

CEO Simon Fox tried to put a brave face on, but sounded decidedly dejected about HMV’s prospects: ‘The economic environment and trading circumstances create material uncertainties, which may cast significant doubt on the Group’s ability to continue as a going concern in the future,’ he said. Which is a mealy-mouthed way of saying that ongoing problems competing with iTunes, Spotify et al have combined with the consumer spending squeeze to create a very unpleasant-sounding monetary cacophony.

To combat its debt problems (HMV currently has £163.7m of debt, the interest on £90m of which will increase significantly in January 2013), the group says it wants to sell HMV Live, its live music operation. That includes 13 venues and several festivals (Lovebox and Global Gathering among them), for which HMV paid £60m just two years ago. Fox says this will ‘get our overall balance sheet where we want it to be’ – the only problem being, of course, that this is HMV’s only profitable operation. Just this year, total sales in that arm rose by 8.2% to £31.2m. So selling it may well help HMV get its financial affairs in order in the short-term, but in the long-term, that would leave the family silver stash empty.

So what now for the company? Having sold Waterstone’s and its Canadian arm, the company is still pinning its hopes on a new store layout which takes the emphasis off music and focuses more on consumer electronics (headphones and iPads, basically). In April, it made big changes to the layouts of all its stores, and now devotes a quarter of its floorspace to gadgets – which, it says, has pushed technology sales up by 42%. Fox added that it’s trying to avoid competing with the likes of Dixons and Curry’s by concentrating on small items that consumers would buy on impulse. Of course, that strategy relies on consumers being in-store in the first place…

So fingers crossed that that strategy works – although for a business with such deep problems, we’re not entirely convinced that shuffling the furniture around is going to work. Still, the good news is that back in January, it managed to secure a £220m refinancing deal with the banks, thus ensuring it’s (theoretically) safe until at least September 2013. So here’s hoping 2012 is a happy new year…