HMV, the last of the High Street's music retailers, has called in administrators, putting over 4,000 jobs at risk.
Facing increasing competition from online music and DVD sales, and struggling with a large portfolio of High Street stores, the board of the retailer met last night and announced the appointment of Deloitte as administrator and suspended share trading. The chain will continue to trade while a buyer is sought for the group.
The HMV board said '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. It is the intention of the administrators to continue to trade whilst they seek a purchaser for the business'.
In its most recent interim financial results for the 26 weeks ended 27 October 2012, HMW Group plc reported a 13.5% drop in total sales from continuing operations to £288.6m (2011: £333.7m).
Like for like sales (from continuing operations) were also down 10.2% (2011: down 11.9%). At the time, HMV stated that 'current market trading conditions result in material uncertainties facing the business [with a] probable covenant breach at the end of January 2013'.
Total Group loss after tax and exceptional items reduced to £36.1m (2011: loss of £50.1m) over the same period.
Last September HMV appointed a new CEO, Trevor Moore, and Ian Kenyon, former Carphone Warehouse finance chief, as CFO in a bid to keep the group afloat.
The demise of the chain was exacerbated when suppliers, including music labels, film companies and DVD suppliers, refused to extend £300m worth of financing to help HMV pay its bank debts.
The company opened its first store on Oxford Street in July 1921 and now has over 200 shops across the UK. This has diluted the brand and the chain has been slow to respond to a changing retail landscape. However, the music business is keen to see the survival of a key High Street retailer as it provides a showcase for new products, which increasingly are moving into online only environment. Last year, 50% of music sales were online.
It is proposed that Nick Edwards, Neville Kahn and Rob Harding, partners of Deloitte LLP, will be appointed as the administrators of the company and certain of its subsidiaries.