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HMV has gone into administration, putting a potential 4,350 jobs at risk, following what is likely to have been poor Christmas trading.
The 239-store chain announced this morning (15th January) that since warning in December it faced “material uncertainties” and could breach bank covenants in January, it had failed to "remedy" the breach, despite “continued discussions”. Its shares were suspended immediately and Deloitte has been announced as the administrator.
In a message to the city, HMV said: “The board regrets to announce that it has been unable to reach a position where it feels able to continue to trade outside of insolvency protection, and in the circumstances therefore intends to file notice to appoint administrators to the company and certain of its subsidiaries with immediate effect.”
The stores will continue to trade while the administrators seek a buyer. Apollo Global Management had been rumoured to be interested in taking over the company after buying some of its debt but has this morning distanced itself from a take-over.
Publishers have called the news "sad" for the industry. Kerr MacRae, executive director of Simon & Schuster, said it was a shame to see another high street outlet face troubling times, and that in the last year the publisher had seen book sales grow significantly with HMV. He said: “They are a good, solid outlet for us and our music books so I am hoping something will rise from the ashes in a smaller way. In would be nice to see a more specialised outfit which will still pick up the book market. It would be a shame to lose it altogether.”
Andrew Furlow, sales and marketing director at Icon Books, said: “It’s very sad news for the high street. We haven’t been dealing with them for a while, but in the past we had books like Why Do People Hate America by Ziauddin Sardar which sold thousands of copies through HMV. It’s a shame that people who perhaps aren’t traditional book buyers have lost a place where they can encounter books on the high street.”
At the weekend, the company began a massive 25% off “Blue Cross” sale, including on books, in a bid to boost sales.
Retail analyst Nick Bubb said it was “inevitable” administrators were called in, and estimated like-for-like sales to be down by around 10%. He said: “With the market cap of HMV down to below £5m, that the equity was basically worthless relative to net debts of up to £175m. The banks clearly demanded a significant shrinking of the 230-store base, to continue their support after the covenant breach, but HMV’s suppliers, like Universal Music, EMI, Warner Brothers and Disney, refused to inject enough new equity to finance that and so it was inevitable that the administrators have been called in. There are some assets to sell off, including the stake in 7Digital, but these won’t make a huge difference to creditors.”
He added: “We can safely assume that the -10% like-for-like sales trend seen in H1 persisted and that the company had moved back into loss, overwhelmed by the structural collapse in its physical markets.”
The Bookseller reported last week that Waterstones, which the HMV group sold last year to Russian oligarch Alexander Mamut for £53m, saw single digit like-for-like growth over Christmas, by contrast.
In August, The Bookseller reported that book sales at HMV had increased by 16% year-on-year, excluding sales of the Fifty Shades titles, after refocusing its core book offer back on “sex, drugs and rock ‘n’ roll”.
However, the chain has faced massive competition from internet companies such as Amazon, Apple and supermarkets selling CDs and DVDs, as well as increasing numbers of people downloading films and music to their devices.