HMV has outlined plans to shut 60 of its HMV and Waterstone’s stores in the next 12 months as sales have continued to fall over the Christmas trading period and the retailer warned on profits.
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HMV said it was taking “aggressive action”, planning to close around 40 of its 285 HMV stores and 20 of its 300 Waterstone’s shops as it continues to “tightly manage” its cost base.
It said: “We expect to exit around 60 stores across our UK businesses over the next 12 months as we seek to re-shape our store portfolio. In addition, we have identified a further £10m per annum of cost savings from across the Group.”
Until now, HMV chief executive Simon Fox has maintained that despite a large portion of its leases coming up for renewal, HMV would not be closing stores, but rather renegotiating for better terms.
In the Stock Market statement today HMV warned on the “well-reported consumer headwinds as we enter 2011”, and said it expects to meet pretax profit expectations, but at the lower end of expectations.
UK & Ireland like-for-likes dropped 13.6% in the 5 weeks to January 1. Total sales fell 11.9% over the Christmas period.
Including its international arm, like-for-likes fell 12.9%.
At the retailer’s book business Waterstone’s, both like-for-likes and total sales were flat at -0.4%.
Across the group, excluding its Live business, like-for-likes slumped 10.2%.
It added that due to the “difficult trading conditions over Christmas and the likely outturn for the year” the retailer expects that compliance with the April covenant test under the Group’s bank facility will be “tight” and HMV is “taking further mitigating actions during the next four months to address this”.
The retailer said that the beginning of its peak trading period was “significantly undermined by severe weather in the UK, which continued through until Christmas”.
HMV chief executive Simon Fox said: “Whilst HMV has had a challenging year to date, it remains a profitable and cash-generative business and a powerful entertainment brand. The pace of change in the markets in which we operate underlines the urgency with which we must continue to transform this business.
“Progress at Waterstone’s this year has been pleasing, and we remain on track to meet our business and financial objectives for the end of the first year of our turnaround programme.”
An HMV spokesman said the retailer could not yet reveal which stores would be closing.