By Ben Sillitoe - 01:30PM - Wed 17th November 2010
HMV will leave one of its prime retail locations next year after exchanging contracts today on the disposal of its leasehold interest in its store towards the western end of London’s Oxford Street.
US fashion retailer Forever 21, which announced its arrival in the UK last month by opening a shop in Birmingham, will take on the lease and the deal is set to be completed in April next year.
The entertainment retailer’s flagship outlet situated close to Oxford Circus will trade as normal, and management will “proactively” try to transfer sales to this store as well as its additional West End retail space in Piccadilly Circus and Selfridges.
Contracts were exchanged for a total cash consideration of £13.75 million, with HMV receiving an initial payment of £2.75 million and future payments of £4.12 million and £6.87 million in January and April respectively.
The proceeds of the disposal will be used to pay down debt, which totalled £67.6 million as of April 24th.
Since then, like-for-like sales for HMV UK & Ireland dropped 14.9 per cent year-on-year during the first quarter of its financial year, while total group sales fell 5.9 per cent.
Once sales from its new live music business are excluded, the group’s overall sales declined 9.9 per cent compared to the same period in 2009.
Simon Fox, HMV CEO, commented: “In the current challenging retail climate and against a backdrop of changing entertainment markets, this transaction on a multiple of over 8 times current profits represents excellent value for our shareholders.
“We are confident of consolidating a proportion of the store’s sales into the remainder of HMV’s West End estate.
“HMV’s strong London presence will also enable us to redeploy our store colleagues from 360 Oxford Street to stores within a reasonable travelling distance.”