HMV set to breach banking covenants after tough Christmas trading

HMV: poor Christmas trading has exacerbated disappointing sales in the summer
HMV: poor Christmas trading has exacerbated disappointing sales in the summer

HMV claims it will continue to operate for the "foreseeable future", despite a looming breach in its banking covenants after worse than expected Christmas trading.

Tough Christmas trading has exacerbated poor sales in the summer, resulting in like-for-like sales dropping 10.2% for the 26 weeks to 27 October.

However, the retailer has managed to reduce its losses to £37.3m for the period, compared to a loss of £48.1m the year before.

HMV is in the process of cost cutting and offloading parts of its business in order to stem losses.

It reduced marketing costs compared to this period last year and has offloaded its loss-making aNobbi e-book business and its Live business,  which included the sale of the flagship Hammersmith Apollo venue in April.

HMW said that it was "unlikely" to meet its next banking covenant test in January 2013, but said it continued to hold "regular and constructive" discussions with its banks.

In its interim financial trading statement, new chief executive Trevor Moore laid out the challenges ahead of the business.

The statement said: "The current level of Christmas trading has not been in line with the level expected and the directors have concluded that it is probable that the January 2013 and April 2013 covenants will not be complied with.

"The directors believe that the group will be able to meet their liabilities as they fall due, including the £30m amortisation payment due in January 2013, and will have adequate resources to continue in operational existence for the foreseeable future."

Moore is in the process of attempting to salvage the HMV business after being appointed in September to replace former chief executive Simon Fox, who left to head up Trinity Mirror.

HMV has been hit hard by a tough summer as a result of suppliers deciding to avoid significant product launches because of the Olympics.

As a result, the retailer worked with suppliers to introduce promotions such as "two for £15" on CDs and "five for £30" on Blu-Ray discs, which helped it increase market share in music and visual, but resulted in like-for-like sales falling 16%.

HMV is still showing improvement in sales of games and technology products, with a 6% sales increase year on year, which was partly due to rival Game closing a number of its stores, and the growing popularity of tablets and headphones.

Discussion

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus
Brand Republic Jobs

subscribe now

Latest

John Lewis walks consumers through its history to celebrate 150 years of business
Waitrose boosts content strategy with 'Weekend Kitchen with Waitrose' C4 tie-up
Hottest virals: Cute puppies star in Pedigree ad, plus Idris Elba and Fruyo
Amnesty International burns candles to illuminate new hope
Toyota achieves the impossible by calming angry Roman drivers
Tom of Finland's 'homoerotic' drawings made into stamps
YouTube reveals user habits to appeal to 'older' marketers
Ex-M&S marketing chief Steven Sharp consulting at WPP
Wolff Olins reveals new CEO after Apple poaches Karl Heiselman
Glasgow offers £30,000 prize to best digital idea for 2014 Commonwealth Games
Google's revenues surge but shares drop as it grapples with transition to mobile
Facebook beats Twitter to most 'marketing friendly' social media site crown, says DMA
Fableists believe children like Finn should be outdoors enjoying life
Homebase, Baileys and Camelot join the line-up at Media360
MasterCard renews Rugby World Cup sponsorship to push cashless message
Lynx unleashes £9m 'Peace invasion' campaign
Social Brands 100 Youth: Pizza Hut most social youth brand in UK
Cheryl Cole is wild and arresting in new L'Oreal work
Morrisons told not to show alcohol ads during YouTube nursery rhymes
O2 head of brand Shadi Halliwell departs after 23 years at company in restructure
Tesco hit by further sales decline as it turns to digital Clubcard and social network
Branding guru Wally Olins dies aged 83
Duracell short film captures epic Transatlantic voyage
Ash runs Tinder experiment to show smokers are less desirable to opposite sex
British Airways teams up with Gerry Cottle Jnr for summer of rooftop film screenings
Arklu says 'girls can be superheroes too' with doll design competition
Coke enters squash market with Oasis Mighty Drops
Virgin Galactic signs up Land Rover as space flight sponsor
Motorola marketer Andrew Morley departs as Google gears up for sale to Lenovo
US Airways apologises after tweeting obscene image at a customer