Waterstone's 'not for sale' insists HMV Group

Waterstone's 'not for sale' insists HMV Group

<p>A HMV Group spokesman has said the company will resist calls to sell off Waterstone&#39;s, after poor Christmas trading figures from the HMV chain heaped pressure on the business to restructure.</p><p>Waterstone&#39;s confirmed yesterday (5th January) that it will close 20 stores over the next twelve months as part of cost-cutting measures across the wider HMV Group that will see 60 stores close in total.<br /><br />The group&#39;s Christmas trading statement, which was brought forward one week, showed Waterstone&#39;s performing better than sister chain HMV with like-for-like sales down just 0.4%, but included the warning that full-year profits would be at the lower end of expectations, and that the group was close to breaking its loan agreements. The agreements are based on the level of rent being paid compared with the group&#39;s profits. HMV said its full year profit would be around &pound;46m, and that it needed to reduce its &pound;150m annual rent bill by 10%. HMV has also committed itself to saving an additional &pound;10m across the group over the next twelve months.<br /><br />Analyst Nick Bubb from Arden Partners reiterated his pre-Christmas call for a break-up. He said: &quot;It&#39;s the only thing they can do, and at &pound;70m to &pound;75m I can see someone such as Tim Waterstone seizing his opportunity. They are relatively stand-alone as a business, and it would be better for them rather than limping along and begin dragged down by HMV.&quot; HMV had net debt of &pound;67.6m at the end of its last financial year, but also has a revolving credit facility of &pound;240m.<br /><br />However, publishers spoken to by<em> The Bookseller</em> on condition of anonymity were lukewarm about a potential buy-out. One said: &quot;It may be that Tim Waterstone could finally do it, but those with short memories will remember Luke Johnson and Borders, while those of us with longer memories will remember when Waterstone&#39;s was put together with W H Smith, and just about everything went wrong. The devil will very much be in the detail.&quot;<br /><br />One former retail m.d. was cautious about a break-up, which he said would see HMV lose what could become a key competitive edge in the future. &quot;If I was running the business I&#39;d fight tooth and nail to avoid selling off one side, since then Simon Fox would lose his one strategic advantage of ultimately being able to put the two businesses together in the same retail locations.&quot; But the observer admitted that Fox would be under considerable pressure in the run-up to the key Spring date when it must meet its banking covenants. &quot;This may force his hand,&quot; the individual noted.<br /><br />A spokesperson for HMV said: &quot;Waterstone&#39;s is not for sale. We have a very explicit turnaround strategy for the business and as you can see it is responding well.&quot; On the banking agreements, the spokesperson added that its announced cost reductions would ensure that these were not an issue come April.<br /><br />For the five weeks to 1st January, like-for-like and total sales fell 0.4% at Waterstone&#39;s. At HMV UK and Ireland like-for-likes slumped 13.6% and total sales were down 11.9%. For the 10 weeks to 1st January, Waterstone&#39;s like-for-like and total sales fell 2.1%. HMV UK and Ireland&#39;s like-for-likes dropped 14.1% and total sales by 12.6%.<br /><br />Waterstone&#39;s m.d. Dominic Myers said he was pleased with the result, which was an improvement on last year&#39;s poor Christmas trading, but disappointed that the adverse weather conditions meant the chain had not performed better.</p><p><a href="../blogs/142475-dog-days-at-hmv.html" target="_blank"><strong>Blog: Dog days at HMV&nbsp;</strong></a></p>