Facing the music: Digital technology could prove oasis for HMV

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Struggling entertainment group HMV reported a further fall in sales in the run up to Christmas, but said a shift away from CDs and DVDs should boost its prospects.

At a time when internet retailers, supermarkets and music and film downloads have damaged sales at HMV’s core CD and DVD markets, the group hopes a switch to fast growing areas such as headphones and tablet computers will improve its fortunes.

HMV, which warned it could go out of business last month, said like-for-like sales fell 8.2 per cent in the five weeks to December 31, despite a number of strong selling albums such as former Oasis guitarist’s Noel Gallagher’s High Flying Birds.

This was an improvement on a 13.2 per cent fall in like-for-like sales in the seven weeks to December 17, but this was partly due to an extra Saturday of Christmas trade in 2011.

In addition to internet and supermarket rivals, HMV, which has 20 stores in Yorkshire, is also suffering from the downturn in consumer spending.

Chief executive Simon Fox admitted that “material uncertainties” may cast doubt on the firm’s ability to continue as a going concern in the future.

But he said he was optimistic about the group’s prospects.

“We still feel confident in the future of the business and the fact that it’s going to be around for some time to come,” he said.

“We’re heading in the right direction and we have a supportive group of stakeholders.”

Mr Fox said that the 144 HMV stores which have been refitted with a range of portable digital products reported an increase in technology like-for-like sales of 51 per cent in the five-week period.

The group sold 500,000 pairs of headphones in December and 20,000 tablet computers.

HMV recently sold bookseller Waterstone’s and announced plans to sell its live music division, which runs 13 venues.

Independent retail analyst Nick Bubb said: “It is fortunate that there appears to be a lot of interest in bidding for the HMV Live division, bearing out Mr Fox’s confidence that a sale could realise well over £60m and keep the group out of jail for a while longer.”