Music and books retailer HMV Group has revealed a raft of cost-cutting measures – including store closures and redundancies – as it fights tumbling sales.
The group will close 60 stores over the next 12 months after it reported a 13.6 per cent slump in its like-for-like sales in UK and Ireland in the five weeks to January 1 and revealed it was struggling to meet the terms of a bank loan.
Shares plummeted 24 per cent after the company, which has about 600 HMV and Waterstone's stores in the UK, warned profits for the year to April would be near the bottom of the current range of City forecasts.
As well as the disruption caused by snow and ice before Christmas, HMV said its core entertainment markets remained weak and underlined the urgency with which it needed to carry out its turnaround strategy, which focuses on broadening the product mix.
Faced with competition from supermarkets in its core CD and DVD markets, the group has branched into new areas such as technology sales, recently including Apple's iPad, as well as entertainment-related products. It has also pushed into fashion, mobile phones and Blu-ray discs, while its swoop for festivals and gig venue owner MAMA Group cemented its position in the fast-growing live market.
But it also pledged aggressive action on costs and said it would close 60 stores across its UK businesses over the next 12 months and seek a further 10m a year of cost savings.
The group confirmed there would be redundancies, but the number of job losses had not been determined. A number of staff will be offered positions in other stores.
HMV admitted it is facing a battle to meet a test on its bank covenants in April, which is linked to its rental bill.
But a spokeswoman for the group said HMV was still confident over its long-term future and believed the cost-cutting measures would help it meet the bank covenant test.
She said the turnaround strategy was working, with strong sales in its live music division and in technology products, which were up 20 per cent in the period.