HMV asks suppliers to slash upfront charges

The four main music groups – Sony, EMI, Universal and Warner Music – are considering letting HMV buy some of their CDs on a sale-or-return basis, instead of making the retailer pay upfront to keep its shelves stocked, according to the Sunday Times.

This alternative payment system could save HMV some £15m, which could be used to pay off some of its £130m debt pile and reduce its borrowing costs.

The big four suppliers are desperate to help the group, which owns 731 HMV, Waterstone’s and Fopp stores, and remains a vital route to market, although an agreement has yet to be reached, said the newspaper. The negotiations come as fears mount over the future of HMV, which recently issued its third profits warning this year and said pre-tax profits would be around £30m, compared to £69m the previous year.

Its sales have come under pressure from supermarkets selling cheap CDs and DVDs and the growing trend of people downloading music.

Sales plunged 13.6 per cent in the UK and Ireland over Christmas and the chain has since been hit by supplier troubles as firms struggle to gain credit insurance due to fears over its trading, which has caused many to demand payment in advance.

Its banks recently agreed to put back financial tests from the end of April to the beginning of July, but it is understood that HMV needs to raise £75m in return for a relaxation of its lending covenants.