HMV has warned it will fall short of analysts’ expectations for full-year profits of £45m due to “challenging” trading conditions.
The embattled entertainment retailer said it was also in danger of breaking its banking covenants, with its debts expected to climb above £130m by June. Shares in the retailer fell 4.5p to a new 52 week low of 16.5p in early London trading following its announcement.
The sombre assessment follows an equally downbeat management statement two months ago, which showed same-store sales were down 10% in the final 10 weeks of 2010, following a drop of 11.5% in the previous six months.
Plans to close 60 UK stores in the coming year are aimed at reducing the retailer’s cost base.
“Trading conditions remain tough, reflecting a difficult consumer environment as well as the changing markets in which we operate,” said chief executive Simon Fox. “However, our business is adapting quickly and we are confident that our plans will ensure its long-term and sustainable future.”
Meanwhile, HMV announced the appointment of AOL Europe, Kingfisher and EMI veteran Philip Rowley as its new chairman, He replaces Robert Swannell, who stepped down from the role to become chair of Marks & Spencer but remains on HMV’s board.
Rowley’s experience made him “ideally qualified to guide HMV as it moves forward”, Fox said.
Top of the Flops: When entertainment exclusives go bad (29 January 2011)
Supermarkets’ entertainment push puts squeeze on HMV (5 January 2011)