Yahoo Finance HMV on the brink of collapse and 2,200 jobs at risk
HMV, the biggest high street music retailer in the UK, is on the brink of collapsing for the second time in six years and around 2,200 jobs are at risk.
Sky News first reported that HMV, which first opened its stores in 1921, is about to tumble into administration. HMV Retail filed a notice of intention to appoint administrators earlier in December.
Sky’s sources said that an announcement about the appointment of global accountancy group KPMG as HMV’s administrator is expected later today (28 December). HMV later confirmed that its 125 UK stores will remain open while talks with suppliers and potential buyers continue.
If HMV does appoint KPMG, it will be the second time the chain has gone into administration in six years. HMV last fell into administration in January 2013. Hilco Capital, which specialises in restructuring and refinancing other companies, bought HMV and its debt for £50m ($63m) at the time.
In a public statement, Paul McGowan, the executive chairman of HMV and Hilco, said: “During the key Christmas trading period, the market for DVDs fell by over 30% compared to the previous year, and while HMV performed considerably better than that, such a deterioration in a key sector of the market is unsustainable.
“HMV has clearly not been insulated from the general malaise of the UK high street and has suffered the same challenges with business rates and other government-centric policies, which have led to increased fixed costs in the business.
“Business rates alone represent an annual cost to HMV in excess of £15m. Even an exceptionally well run and much-loved business such as HMV cannot withstand the tsunami of challenges facing UK retailers over the last 12 months, on top of such a dramatic change in consumer behaviour in the entertainment market.”
The digital crush
HMV, which stands for ‘His Master’s Voice’, is one of Britain’s most iconic brands. Famed for its logo of a dog sitting next to a gramophone, the first shop was opened in one of London’s most lucrative shopping areas — Oxford Street — in 1921 by the composer Sir Edward Elgar.
Fast-forward nearly a century later, HMV is now suffering from the boom in digital shopping, as are other traditional retailers. The issues retailers face can be seen in the latest set of data when it comes to prime shopping days.
Market research firm Springboard revealed that the number of shoppers in Britain visiting stores on the day after Christmas — Boxing Day— fell for the third consecutive year. Footfall on 26 December tumbled 3.1% year-on-year. Even on Black Friday (29 November this year), footfall was down 10.7%.
“If the UK retail sector’s New Year’s resolution was to get its act together for 2019, it’s already on the back foot with another high street name (HMV) flirting with administration (again!),” Mike van Dulken, head of research at Accendo Markets, told Yahoo Finance UK.
“Investors and consumers alike are already holding their breath for a busy January when around 40 retail and consumer-exposed companies (supermarkets, department stores, fashion, pubs, etc) issue trading updates/results, many focusing on how good or bad the key Christmas period was,” he said.
“There are already conflicting reports about the health of Boxing day sales: we had a profits warning from ASOS and [Sports Direct founder] Mike Ashley said November was terrible, and yet November UK retail sales were surprisingly strong.”
Van Dulken said expensive rents, fierce online competition, and the impact of Brexit uncertainty on consumer confidence were all hurting traditional retailers.
Compounding this problem for HMV is the fact the way people buy and share music has radically changed from the days of records, cassettes, and CDs — and now even downloads.
In 2017, music streaming via digital services including Spotify and Apple Music turbo-charged the fastest growth in UK music consumption in 20 years. Buying and listening to music was driven by audio streaming, which jumped by over 50% between 2016 and 2017. Meanwhile, even digital downloads and CDs fell over the year, according to the Entertainment Retailers Association (ERA).
DVDs are following suit. In 2017, film and TV streaming and downloads overtook DVD sales for first time.
