HMV forecasts a surprise return to profit

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Music and film retailer HMV offset anticipated annual losses of £16m yesterday by predicting a surprise return to profit in the following year.

The struggling retailer, which has around 250 stores in the UK, said “very weak” trading in January and a poor release schedule for CDs and DVDs had pushed it to a bigger than expected loss for the year just ended.

However, it is expecting that the collapse of rival Game and HMV’s closer relationship with key music and film suppliers will then help it back into the black.

The company is now looking for pre-tax profits of at least £10m for the 2012/13 financial year, compared with City forecasts for a loss of around £5m.

Chief executive Simon Fox said: “The last year has been a difficult and challenging one for HMV and this will be reflected in our annual results.

“However, we are confident that the actions we have taken will enable us to significantly improve our profit and cash generation in the year ahead.”

The group was recently thrown a lifeline when suppliers including Universal Music came to its rescue, signing improved terms that will ultimately help it shed around half of its £180m debt pile over the next three years. It said its year-end debt figure was expected to be around £168m.

The group’s recovery plans include a shift in focus to technology products, including by refitting stores with an extended gadget range.

It has sold bookseller Waterstones and is currently looking to offload HMV Live, which runs 13 venues and a number of festivals including Lovebox in London and Global Gathering near Stratford-upon-Avon.

HMV reported “gradual improvement” in recent trading but like-for-like sales were still 12.9 per cent lower in the 17 weeks to April 28 and 11.7 per cent lower across the whole financial year.