HMV voices concern over mastering its debt
HMV Group, Britain's biggest retailer of CDs and DVDs, raised fresh doubt about its future after saying it will probably breach debt covenants next year amid continued losses and lower-than-expected Christmas sales.
The company probably won't comply with agreements on its borrowings in January and April, HMV said in a statement, adding that full-year results are unlikely to meet expectations.
"This represents a material uncertainty which may cast doubt upon the group's ability to continue as a going concern," the company said in the statement. HMV "may be unable to continue to realise assets and discharge liabilities in the normal course of business."
HMV shares - which were trading at £150.50 in 2009 plunged as much as 44 per cent in London to close at £2.49. They've fallen 21 per cent in 2012, after losing almost all their value in the previous two years.
The company, which has been hurt by competition from supermarkets and online retailers such as Amazon.com, is reshaping its business as more consumers download music and movies rather than purchase CDs and DVDs.
'A value trap'
"We continue to see HMV as a value trap with potentially insurmountable structural issues," Freddie George, an analyst at Seymour Pierce with a sell recommendation, said in a note.
Music producers and game developers delayed their release schedule this year as suppliers avoided adding new products during the London Olympics and the Queen's Jubilee celebrations, HMV said today. The fiscal third quarter, when the retailer normally gets about 46 per cent of revenue, will be even more important this year as HMV seeks to boost sales, it said.
The company reported a net loss of £36.2 million ($A55 million) in the 26 weeks through October 27.
"We've been very focused around establishing strong relationships with our suppliers, key stakeholders and banks," chief executive Trevor Moore said. HMV is looking to turn around the business by adding more space for games such as Call of Duty after the collapse of Game Group, and training staff more on products and customer service.
Finance director Ian Kenyon said suppliers continue to support the company with inventory, availability and promotions. He wouldn't comment on whether the retailer would still meet £10 million pre-tax profit estimates this fiscal year.
"People are choosing more carefully, their purchases are more considered," Moore said, citing the popularity of deals such as two chart CDs for £20.
Meanwhile, across the Atlantic, Warner Music Group, the third largest recording company in the US, says quarterly revenue grew for the first time in five quarters in the three months through September as sales grew of both digital music and CDs.
Chiedf executive Stephen Cooper says the company is positioned to take advantage of the music industry's "more stable recent trends".
Japanese acts Kobukuro and Tatsuro Yamashita lifted sales, as did Green Day, Superfly and Muse.
Warner Music said revenue rose 2 per cent to $US731 million ($A695.69 million), the first increase since the April-June 2011 quarter, when sales rose 5 per cent.
The company's loss shrank to $US18 million from $US103 million.
Warner Music was taken private by billionaire Len Blavatnik's Access Industries for about $US1.3 billion in July last year.
It still has publicly traded debt.