HMV profits rocket in first turnaround year

The entertainment retailer reported profits before tax and exceptionals soared 25.2 per cent from£45.2 million to£56.6 million in the year to April 26. Total group sales increased 11.3 per cent and like-for-likes climbed 7.3 per cent.

In the same period, like-for-like sales jumped 11.4 per cent at HMV UK & Ireland and 3.3 per cent at Waterstone’s.

Chief executive Simon Fox said: “We’re confident in the three-year plan, but we’re not forecasting double-digit like-for-likes in the year ahead. There are big cost savings to come this year.”

HMV Group has delivered cost savings via initiatives such as centralising procurement operations and will continue to concentrate on the roll-out of its next-generation stores, with 10 to 15 opening in the next year.

Panmure Gordon analyst Philip Dorgan was confident HMV is heading in the right direction. “It’s not been a bad first year of recovery. It is full of ideas and its product is relatively immune to the slowdown,” he said.

“I wouldn’t expect like-for-like sales of 11.3 per cent to be repeated next year, but there are substantial self-help opportunities to drive profits forward.”

Fox labelled the next 12 months as the retailer’s “digital year”, with the launch of its social networking site Getcloser.com in autumn and further elements to be added to the HMV and Waterstone’s sites.

However, Landsbanki analyst Mark Photiades warned that the cross over to digital might not be easy. “The turnaround plan appears to be progressing well. That said, our concerns remain that entertainment retailers face considerable structural pressures from the shift in media towards digital distribution.”

HMV also plans to roll out its multichannel loyalty card, which is available to Waterstone’s customers at present, to its eponymous music chain by autumn.