Sales for the nine weeks to March 10 declined by 3 per cent for the group, including a fall of 6.1 per cent at Waterstone's and a drop of 2 per cent at HMV.
Poor trading, particularly in overseas markets and at Waterstone's were blamed for the continuing deterioration since the January update. In the HMV chain, although there have been market share gains, the planned improvement of gross margin and some of the targeted cost savings have not materialised, which has led to changes in the UK management.
In his strategic and operational review of the business, Fox outlined three main areas for change - driving cost efficiency, revitalising the core business and establishing new channels. He said that savings of£40 million will be achieved by 2009/2010 by simplifying the supply chains and from a review of the UK store portfolio with about 20 to 30 Waterstone's outlets, as well as a small number of underperforming HMV branches facing possible closure.
An HMV store of the future is being developed and will be tested this autumn. Waterstone's will widen its children's books proposition, as well as offering gift stationery. A loyalty card will also be launched across both brands.
The group also plans to improve its presence in new channels, with the launch of a social networking site and a content partnership with mobile phone network 3.
Fox said: 'The markets in which we operate are undoubtedly very challenging. Waterstone's and HMV are great brands, but have not adapted quickly enough to the way customers are now buying and consuming media. Our performance has suffered as a consequence. There is a great deal to do and I have every confidence that this plan will turn the business around.'
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