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Trading decline continues at HMV as LFLs fall 15%

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Total retail sales for entertainment group HMV dropped 21.8 per cent over its first quarter period, it was revealed today ahead of its AGM.

The 18 weeks to September 3rd 2011 saw the disposal of 29 of the beleaguered trader’s stores hitting headline revenues but on a like-for-like (LFL) basis sales were still down 15.1 per cent compared to the same period last year.

Consumers ongoing migration online to buy music, films and games in both physical and digital form, has crippled the firm’s traditional offering but CEO Simon Fox believes that its shift of product mix towards electricals is started to show signs of success.

“In technology, LFL sales in our initial six ‘Fast Forward’ stores have continued to grow by over 100 per cent, and during the first quarter we have been preparing our enhanced technology offer, the benefit of which is not included in our first quarter.

“The roll-out of these space changes to the majority of the 150 stores takes place during September, and is on track to be completed at the beginning of October.”

By selling more stereos, digital radios and games consoles, HMV is rightly diversifying its product mix, according to Neil Saunders, Consulting Director of Verdict Research.

In the short term a focus on high-end technology products should boost trading but in the long term it is not guaranteed that it will be able to establish itself in a challenging market.

Saunders told Retail Gazette: “Competition is rife in the electricals sector, margins are thin and the internet is taking a larger and larger slice of the pie each year.

“In other words, HMV could be accused of having jumped out of the frying pan of music into the fire of electricals.”

As part of a turnaround strategy put into action earlier this year to stave off administration, the retailer sold its operations in Canada and the high street bookselling business Waterstone’s.

This allowed it to revise the terms of its revolving credit facilities of £220 million with its lending banks, which Fox described as “critical” and ahead of a key Christmas trading period he said “the group is highly focused on its turnaround plans”.

Performance has been helped by the success of its HMV Live brand which manages music venues and events across the country, with attendances up 20 per cent LFL year-on-year.

A move into live music seems to have been another sensible move by the group but Saunders believes in retail it still operates too many stores and says many questions still remain about the group’s long-term future.

Saunders added: “The simple truth is that HMV still has too many stores.

“The tide of music retail is flowing in one direction: that is more and more to online. Against that backdrop, HMV will need to reduce the amount of physical space it trades from.

“Larger centres can still work for HMV but smaller more local high streets arguably don’t need an HMV store.”

Published on Friday 09 September by Editorial Assistant

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