Entertainment retailer HMV has appointed administrators and suspended shares as weak trading conditions forced the company from the high street, it has been confirmed today.
Citing the difficulty of “current market trading conditions”, the retailer, which was founded in 1921, announced that it has been unable to reach an agreement with banks and key stakeholders to avoid an “imminent” breach of its banking covenants.
As such, HMV has appointed business advisory firm Deloitte as administrators of the company and announced that ordinary shares will be suspended from trading on the London Stock Exchange “with immediate effect.”
In a statement, the group said: “The Board regrets to announce that it has been unable to reach a position where it feels able to continue to trade outside of insolvency protection, and in the circumstances therefore intends to file notice to appoint administrators to the Company and certain of its subsidiaries with immediate effect.
“The Directors of the Company understand that it is the intention of the administrators, once appointed, to continue to trade whilst they seek a purchaser for the business.”
However, the administration is expected to lead to thousands of job losses and is the second major high street administration in under a week, following the collapse of photographic retailer Jessops last Wednesday .
Corporate health monitoring specialist Company Watch noted that the news comes as a bitter blow to the UK retail sector, adding that nearly 13,000 retail jobs have been lost or put at risk in just seven weeks, bearing in mind the administration of Comet in November.
Nick Hood, Head of External Affairs for Company Watch, commented:
“The recession has only played a small part in the sad demise of HMV.
“The main culprit has been the relentless move to downloads and online purchasing of music and films, as well as irresistible competition from the major supermarkets, who have pushed market prices down to levels with which HMV has been unable to live.
“The heavy burden of too many expensive store locations has restricted HMV’s ability to respond fast enough to changing retail times, despite the sale of some of its most precious assets, such as Waterstones and The Apollo.
“The prospects for a rescue of more than a small part of the business seem highly uncertain right now.
“Sadly, you can’t make a viable business out of nostalgia.”