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HMV Group should follow W H Smith's lead in ruthlessly cutting costs if it is to survive, according to press reports on its Christmas trading figures. There were also further calls for the group to sel off Waterstone's in a bid to reduce its debt.
Retail analysts were gloomy about the retailer's ability to manage the structural shifts in its marketplace. Speaking to the Independent, Andrew Wade of Numis Securities said: "With unabating structural pressures from new non-food grocery space and online competition, trading showing no sign of improvement and banking concerns now hanging over the business, we continue to [advise investors to] steer well clear." Peel Hunt's John Stevenson said: "While short-term snow disruption is not a structural failing, we feel the market is changing at a faster rate than HMV."
In the Financial Times' Lombard column, Jonathan Guthrie said: "Increasingly the shares, which have fallen 80% since April 2009, are supported by the expectation that the group will break itself up or be taken over."
Richard Fletcher, the Daily Telegraph's City editor, noted Waterstone's outperformance of HMV over Christmas. He said: "Are bookworms more hardy than music lovers? Were shoppers more prepared to brave the elements for Jamie's 30 Minute Meals but not the latest Lady Gaga album?" However, he said HMV Group could still make £46m of profit this year. "I wouldn't write HMV off just yet. As Kate Swann has demonstrated at W H Smith, with a ruthless focus on costs, even the most unfashionable retailer can deliver consistent profit growth for shareholders."
The Guardian also noted HMV Group's profitability, the fact it is cash generating and is flexible in its leases. However, while noting the same points as the Guardian, David Wighton, the Times' business editor warned: "But, as Woolworths showed, the brand is not much good when there is no compelling reason to go to the shops."
Alex Brummer, the Daily Mail's City Editor, was more critical of Waterstone's. He said: "It is operating in a supremely difficult market. Whereas American chain Barnes & Noble has been adapting and produced its own e-reader the Nook . . . Waterstone's has not been terribly innovative. It occupies expensive space which competitors believe makes anything beyond break even almost impossible. Moreover, its internet site looks very much below par."