Thousands of jobs in the balance as music stops for HMV
THE venerable British music chain HMV has called in administrators, putting 4350 jobs and 238 stores at risk as it becomes the latest retail casualty on the High Street.
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.