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HMV goes into administration again blaming 'a tsunami of challenges' HMV goes into administration, putting 2,200 jobs at risk
(35 minutes later)
HMV has collapsed into administration for the second time in six years, putting more than 2,200 jobs at risk.HMV has collapsed into administration for the second time in six years, putting more than 2,200 jobs at risk.
The music and movies retailer has appointed administrators from KPMG after sales slumped over Christmas. The store chain said sales of DVDs, across the whole market, had plunged by 30% on last year’s levels and that retailers of all types were facing “a tsunami of challenges.” The music and film retailer appointed administrators from KPMG after sales slumped over Christmas.
HMV confirmed its 125 UK stores will remain open while talks with suppliers and potential buyers continued. It said sales of DVDs across the whole market had plunged by 30% on last year and retailers of all types were facing “a tsunami of challenges”.
HMV confirmed on Friday that its 125 UK stores will remain open while talks with suppliers and potential buyers continue.
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The 97-year-old retailer was rescued by Hilco, the restructuring firm, when it previously collapsed into administration in 2013. The 97-year-old retailer was rescued by Hilco, a restructuring company, when it previously entered administration in 2013.
Paul McGowan, the executive chair of HMV and Hilco, said on Friday the decline in the UK CD and DVD market had made the situation impossible. Paul McGowan, the executive chairman of HMV and Hilco, said the decline in the CD and DVD market had made the situation impossible.
“During the key Christmas trading period the market for DVD fell by over 30% compared to the previous year and, while HMV performed considerably better than that, such a deterioration in a key sector of the market is unsustainable. “During the key Christmas trading period, the market for DVDs fell by over 30% compared to the previous year, and while HMV performed considerably better than that, such a deterioration in a key sector of the market is unsustainable,” he said.
“HMV has clearly not been insulated from the general malaise of the UK high street and has suffered the same challenges with business rates and other government-centric policies which have led to increased fixed costs in the business. “HMV has clearly not been insulated from the general malaise of the UK high street and has suffered the same challenges with business rates and other government-centric policies, which have led to increased fixed costs in the business.
“Business rates alone represent an annual cost to HMV in excess of £15m. Even an exceptionally well-run and much-loved business such as HMV cannot withstand the tsunami of challenges facing UK retailers over the last 12 months on top of such a dramatic change in consumer behaviour in the entertainment market.” “Business rates alone represent an annual cost to HMV in excess of £15m. Even an exceptionally well run and much-loved business such as HMV cannot withstand the tsunami of challenges facing UK retailers over the last 12 months, on top of such a dramatic change in consumer behaviour in the entertainment market.”
HMV’s latest troubles are a sign of the problems facing entertainment retailers during a period of rapid change for the industry, from online specialists to streaming sites such as Netflix. The retailer is also suffering from the wider downturn on UK high streets, as shoppers rein in spending amid Brexit uncertainty. HMV’s latest troubles are a sign of the problems facing entertainment retailers during a period of rapid change for the industry, with competition ranging from online specialists to streaming sites such as Netflix. The retailer is also suffering from the wider downturn on UK high streets, as shoppers rein in spending amid Brexit uncertainty.
Mike Ashley, founder and chief executive of Sports Direct, warned before Christmas that November was the “worst on record” for retailers and would “literally smash them to pieces.”
Bonmarché, the budget womenswear retailer, said conditions were “unprecedented” and worse than the 2008 recession as it warned the 300-store chain could make a loss this year due to weak trading.
Meanwhile, big high street names including Primark, John Lewis and Superdry all sounded the alarm on trading conditions in the run-up to Christmas, and more retailers are expected to follow.
Physical retailers have been hit by a combination of changing habits, unseasonably warm weather, rising costs and broader economic problems. This year has seen the disappearance of Toys R Us, Maplin and Poundworld as a result.Physical retailers have been hit by a combination of changing habits, unseasonably warm weather, rising costs and broader economic problems. This year has seen the disappearance of Toys R Us, Maplin and Poundworld as a result.
In terms of habits, shoppers are switching to buying online. The likes of Amazon have an unfair advantage because they have a lower business rate bill, which holds down costs and enables online retailers to woo shoppers with low prices. Business rates are taxes, based on the value of commercial property, that are imposed on traditional retailers with physical stores. At the same time, there is a move away from buying ‘stuff’ as more people live in smaller homes and rent rather than buy. Those pressures have come just as rising labour and product costs, partly fuelled by Brexit, have coincided with economic and political uncertainty that has dampened consumer confidence.In terms of habits, shoppers are switching to buying online. The likes of Amazon have an unfair advantage because they have a lower business rate bill, which holds down costs and enables online retailers to woo shoppers with low prices. Business rates are taxes, based on the value of commercial property, that are imposed on traditional retailers with physical stores. At the same time, there is a move away from buying ‘stuff’ as more people live in smaller homes and rent rather than buy. Those pressures have come just as rising labour and product costs, partly fuelled by Brexit, have coincided with economic and political uncertainty that has dampened consumer confidence.
Trading has been tough, particularly for clothing retailers, as another relatively mild autumn hit sales of costly items such as coats and knitwear while shoppers have held out later than ever in the hope of getting bargain presents. The founder of Sports Direct, Mike Ashley, described November as “the worst on record, unbelievably bad” as he warned that warned that Debenhams and other big retail names faced being “smashed to pieces” by a high street downturn.Even online specialist Asos shocked the City when it issued a profits warning earlier this month as it admitted it had lost sales by not offering steep enough discounts during the Black Friday week.Trading has been tough, particularly for clothing retailers, as another relatively mild autumn hit sales of costly items such as coats and knitwear while shoppers have held out later than ever in the hope of getting bargain presents. The founder of Sports Direct, Mike Ashley, described November as “the worst on record, unbelievably bad” as he warned that warned that Debenhams and other big retail names faced being “smashed to pieces” by a high street downturn.Even online specialist Asos shocked the City when it issued a profits warning earlier this month as it admitted it had lost sales by not offering steep enough discounts during the Black Friday week.
Retailers with a high street presence want the government to change business rates. They also want more political certainty as the potential for a no deal Brexit means some are not only incurring additional costs for stockpiling goods but are unsure about the impact of tariffs after March 2019. Retailers also want more investment in town centres to help them adapt to changing trends, as well as a cut to high parking charges which they say put off shoppers.Retailers with a high street presence want the government to change business rates. They also want more political certainty as the potential for a no deal Brexit means some are not only incurring additional costs for stockpiling goods but are unsure about the impact of tariffs after March 2019. Retailers also want more investment in town centres to help them adapt to changing trends, as well as a cut to high parking charges which they say put off shoppers.
In the October budget the government announced some relief on business rates for independent shopkeepers. It has also set up a £675m “future high streets” fund under which local councils can bid for up to £25m towards regeneration projects such as refurbishing local historic buildings and improving transport links. The fund will also pay for the creation of a high street taskforce to provide expertise and hands-on support to local areas.In the October budget the government announced some relief on business rates for independent shopkeepers. It has also set up a £675m “future high streets” fund under which local councils can bid for up to £25m towards regeneration projects such as refurbishing local historic buildings and improving transport links. The fund will also pay for the creation of a high street taskforce to provide expertise and hands-on support to local areas.
Some retailers could go under. Weakened by a difficult Christmas – which accounts for the entire annual profits of many retailers, and with further Brexit wobbles to come – retailers are facing a tough 2019. Another rise in the national minimum wage in April and the falling value of the pound against the dollar, which is used to buy goods in the Far East, will also add to costs and hit profits.Some retailers could go under. Weakened by a difficult Christmas – which accounts for the entire annual profits of many retailers, and with further Brexit wobbles to come – retailers are facing a tough 2019. Another rise in the national minimum wage in April and the falling value of the pound against the dollar, which is used to buy goods in the Far East, will also add to costs and hit profits.
A report by KPMG and Ipsos Retail Think Tank warned this week there will be “more casualties to come” on the high street, as the battle to win customers and stay afloat will intensify in 2019. Mike Ashley, the founder and chief executive of Sports Direct, warned before Christmas that this November was the “worst on record” for retailers and would “literally smash them to pieces”.
Richard Lim, chief executive of Retail Economics, said HMV was the “first victim” of poor Christmas trading, as the industry faces a major shift in consumer behaviour, fiercer competition and spiralling operating costs. Bonmarché, the budget womenswear retailer, said conditions were “unprecedented” and worse than the 2008 recession as it warned the 300-store chain could make a loss this year due to weak trading.
Alex Neill, from the consumer group Which?, advised anyone with HMV vouchers to spend them as soon as possible. She said: “If you have recently bought anything from HMV, you may not be able to claim a refund or exchange the item if the company ceases trading. If you have gift vouchers you should try to spend these in-store as soon as possible.” Meanwhile, big high-street names including Primark, John Lewis and Superdry sounded the alarm on trading conditions in the run-up to Christmas, and more retailers are expected to follow.
Neill also urged anyone currently planning to spend more than £100 in an HMV outlet to use a credit card “as you’ll be able to make a claim against your credit card company under Section 75 Consumer Credit Act if anything goes wrong.” A report by KPMG and Ipsos Retail Think Tank warned there will be “more casualties to come” on the high street, as the battle to win customers and stay afloat will intensify in 2019.
Despite its decline HMV remains one of the best-known names on the high street. HMV – His Master’s Voice – was founded in 1921 when its first store opened on London’s Oxford Street, selling gramophones, radios and popular music recordings. Richard Lim, the chief executive of Retail Economics, said HMV was the “first victim” of poor Christmas trading, as the industry faces a major shift in consumer behaviour, fiercer competition and spiralling operating costs.
That first store was officially opened by the British composer and conductor, Sir Edward Elgar, and the brand was made instantly recognisable by its mascot Nipper the dog, which still features on its logo peering into a gramophone. Alex Neill from the consumer group Which? advised anyone with HMV vouchers to spend them as soon as possible.
HMV later hosted in-store events and product launches, featuring singers and musicians including Kate Bush, Michael Jackson and Amy Winehouse. “If you have recently bought anything from HMV, you may not be able to claim a refund or exchange the item if the company ceases trading. If you have gift vouchers, you should try to spend these in-store as soon as possible,” she said.
Neill also urged anyone planning to spend more than £100 in a HMV store to use a credit card, “as you’ll be able to make a claim against your credit card company under section 75 [of the 1974] Consumer Credit Act if anything goes wrong.”
Despite its decline, HMV remains one of the best-known names on the high street. It was founded in 1921 when HMV’s first store opened on Oxford Street in central London, selling gramophones, radios and popular music recordings.
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