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HMV’s insurance cover is reviewed

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HMV Group’s assurance that it has no problems with stock availability has not stopped its share price falling this afternoon, following a company announcement.

In a statement released this morning the entertainment retailer confirmed previous speculation that credit insurers to its suppliers were reducing their level of cover in response to the firm’s recent poor performance.

Earlier this month HMV announced that 60 stores across its core and Waterstone’s businesses are to close, and market profit targets are now unlikely to be met following poor Christmas trading.

Today’s statement from the retailer read: “In light of recent comment on credit insurance cover, HMV Group wishes to clarify that, following the peak trading period, credit insurers are reviewing the level of cover they provide on the group.”

Credit insurance allows suppliers to cover monies that are owed to them by their customers, but insurance companies will be reluctant to offer financial protection against firms which appear fragile or in danger.

If suppliers decided that working with HMV was not worth the risk, its stock levels would soon dry up and it would be unable to trade.

“Whilst this has resulted in the reduction in the availability of credit insurance to certain of the company’s suppliers, our business remains a core channel to market for them,” the statement continued.

“We continue to maintain excellent relations with our suppliers and have had no difficulty in obtaining stock.”

Starting the day at above 26p per share, HMV’s stock market listing fell to below 23p this morning before moving back up to 24p this afternoon.

Fierce competition from online rivals such as Amazon, and the increasing popularity of downloaded music has led to HMV as one of the last remaining high street entertainment retailers.

The company has been diversifying its product offer and expanding its services over the last year to try and reverse its decline.

Published on Wednesday 19 January by Editorial Assistant

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