Thousands of jobs in the balance as music stops for HMV
The 92-year-old chain has had its sales eroded by fierce competition from online music retailers, digital downloads and supermarkets. It has also been saddled with £220 million ($336 million) of bank debt.
HMV said talks with banks and stakeholders to try to avert a breach of its banking covenants had been unsuccessful. Its shares were suspended with immediate effect. The chain's administrators intend "to continue to trade while they seek a purchaser for the business", HMV said.
The company had been expected to issue a crucial Christmas trading update this week. Ian Kenyon, its group finance director, said Christmas trading had been "slightly behind expectations".
Mr Kenyon said the chain's suppliers had been "amazingly supportive" and were "working hard" to try to find a future for HMV on the High Street.
Music and film suppliers, who want HMV to survive as internet retailers erode their margins, have been crucial to keeping HMV afloat. It is understood they provided about £40 million of support in the run-up to Christmas. However, it is thought they were not prepared to offer the level of help needed to save it from administration.
Private equity firm Apollo Global Management had been seen as a possible buyer for HMV after buying some of its debt but was said not to be planning a takeover.
HMV warned last month that its future was in "material uncertainty" and it was likely to breach banking covenants. Half-year like-for-like sales had fallen 10.2 per cent and the group posted a loss of £36 million.
At the weekend, it began a massive "blue cross" sale in an attempt to boost revenues but it would appear that it failed to stem its haemorrhaging finances.
HMV raised cash last year by selling off book retailer Waterstones for £53 million and the Hammersmith Apollo music venue for £32 million. It has also shifted its emphasis from the fast-declining CD and DVD market to new technology products.
The demise of HMV is the latest blow to the High Street after the collapse of JJB Sports and Comet in recent months. The chief executive of HMV, Trevor Moore, previously led camera chain Jessops, which fell into administration last week.
HMV floated on the London Stock Exchange in May 2002, valued at £1 billion, and its shares hit an all-time high of £2.74 in early 2005. On Monday, they closed at 1.1 pence, valuing it at just £4.7 million.
Frequently Asked Questions about this Article…
HMV has called in administrators after failing to reach an agreement with banks and stakeholders to avoid breaching its banking covenants. The company cited heavy competition from online music retailers, digital downloads and supermarkets, and said it was carrying about £220 million of bank debt. Its shares were suspended and administrators intend to continue trading while they seek a purchaser.
The article reports that about 4,350 jobs and 238 HMV stores are at risk as a result of the administration process.
HMV warned that its future was in “material uncertainty.” Half-year like-for-like sales fell 10.2% and the group posted a loss of £36 million, while Christmas trading was described as “slightly behind expectations,” all of which worsened its financial position.
Yes. According to the article, the administrators intend to continue trading the business while they seek a purchaser, which could help preserve value and jobs in the short term.
Suppliers were reportedly supportive and provided about £40 million of short-term help ahead of Christmas, but that level of support was not enough to prevent administration. Private equity firm Apollo Global Management had bought some of HMV’s debt but was said not to be planning a takeover.
HMV’s shares were suspended with immediate effect. The stock closed at 1.1 pence, valuing the company at about £4.7 million—far below its IPO valuation and earlier highs. Suspension means shares cannot be traded on the market while the company is in administration, creating uncertainty for shareholders.
To raise cash, HMV sold book retailer Waterstones for £53 million and the Hammersmith Apollo music venue for £32 million. The chain also ran a large “blue cross” clearance sale and shifted emphasis toward new technology products as CD and DVD sales declined.
HMV’s administration is described as the latest blow to the High Street, following the collapse of retailers such as JJB Sports and Comet. The article links HMV’s troubles to structural changes—online retail, digital downloads and supermarket competition—that have eroded margins and sales across traditional retail chains.
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