HMV has warned it faces “material uncertainties” going forward and is likely to breach a bank covenant in January.
In its latest trading update, the entertainment retailer—which sells books as well as DVDs, music and device-ware—reported sales for the first half of its financial year were down 13.5% to £288.6m with like-for-like sales down 10.2%.
In the 26 weeks to 27th October 2012 the group reduced its total loss after tax and exceptional items to £36.1m, down from £50.1m at the same point last year. Its net cash outflow from operating activities has increased to £33.5m up from £28.4m in 2011.
Notably, the retailer wrote in its business update that “current market trading conditions result in material uncertainties facing the business”. It added that there would be a “probable covenant breach at the end of January 2013”. It blamed a “disappointing” release schedule over summer which impacted on sales, although it also added that like-for-likes saw an uplift after summer.
HMV’s new chief executive Trevor Moore, appointed in September to replace Simon Fox, said: “HMV has had a difficult first half. However, the business has started to deliver a number of new initiatives, which will help to maximise the seasonal sales opportunity and provide a platform for growth in 2013. Additionally, as we trade through this period we will continue to develop further initiatives with our suppliers and I will provide updates at the appropriate time.”
Within the period HMV sold its stake in e-book business Anobii to Sainsbury’s for £1.
In August, The Bookseller reported that book sales at HMV, which formerly owned Waterstones, had increased by 16% year-on-year, not including sales of Fifty Shades series, as a result of refocusing its core offer back on “sex, drugs and rock ‘n’ roll”. It also introduced a two for £10 chart offer. Including Fifty Shades, the retailer had increased year-on-year book sales by 28% in August, it said.