4,000 jobs at risk as HMV set to go into administration

4,000 jobs at risk as HMV set to go into administration

A HMV store

The iconic HMV logo

First published in Business News The Northern Echo: Photograph of the Author by

MAJOR high street record store HMV is poised to call in administrators, according to reports.

Directors for the music retailer are in talks about the company's future, and accountancy firm Deloitte could be waiting in the wings.

A number of options were being discussed by the HMV board.

The chain employs more than 4,000 people across almost 240 stores in the UK and Ireland.

The company has stores in Darlington, Teesside Park, Middlesbrough, Stockton, Durham, Sunderland, Gateshead, Newcastle, South Shields, York and Harrogate.

In a statement HMV said: "The board regrets to announce that it has been unable to reach a position where it feels able to continue to trade outside of insolvency protection..."

The statement continued that the board "understand that it is the intention of the administrators, once appointed, to continue to trade whilst they seek a purchaser for the business".

Deloitte declined to comment.

In the run-up to Christmas HMV's boss, Trevor Moore, warned the entertainment group was in trouble as he revealed the chain was in talks with banks over its future following worse-than-expected trading over the festive period.

The chief executive said market conditions suggested the group would fail to meet expectations for the year to April, so would not meet the terms of its bank loans.

HMV said like-for-like sales fell 10.2 per cent in the 26 weeks to October 27, last year, as its pre-tax loss narrowed to £36.1 m, compared to £50.1 m the previous year.

Shares tumbled 39 per cent after the dismal results were published, giving the retailer a market value of just £10.1 m.

Mr Moore joined the group from camera chain Jessops, which itself went into administration last week at the cost of 1,370 jobs across its 187 stores.

Suppliers including Universal Music came to HMV's rescue in January 2011 with a deal which helped the retailer shed some of its huge debt pile.

Its struggle has seen it sell off several parts of its business, including the Waterstones book retailer, while closing loss-making stores.

HMV also offloaded its Hammersmith Apollo venue for £32m, which enabled it to thrash out a new deal with lenders.

Back in May, last year, when former boss Simon Fox was still in charge, the group said it was looking for pre-tax profits of at least £10m for the 2012/13 financial year.

Analysts tonight said HMV did not react quickly enough to the digital revolution of the music industry.

Neil Saunders, the managing director of retail analyst firm Conlumino, said: "Although there is a sense of poignancy over the potential administration of HMV, this outcome was always inevitable.

"While many failures of recent times have been, at least in part, driven by the economy, HMV's reported demise is a structural failure.

"In the digital era where 73.4 per cent of music and film are downloaded, HMVs business model has simply become increasingly irrelevant and unsustainable.

"Coming hard on the heels of the failure of Comet and Jessops this latest potential administration demonstrates the significant pressure on retailers, many of which are contending with a consumer downturn alongside structural shifts in the sector.

"It is inevitable that there will be further casualties in 2013 which will add to vacancy rates and hasten the decline of some high streets.

"As for HMV, its future is uncertain. The brand certainly has some value, however, while someone could arguably turn a profit in running some of the stores for a period of time they would still be betting against the future.

"By our own figures, we forecast that by the end of 2015 some 90.4 per cent of music and film sales will be online. The bottom line is that there is no real future for physical retail in the music sector."

The first HMV store was opened in 1921, with composer Edward Elgar doing the honours.

HMV stands for His Master's Voice, a painting by Francis Barraud, of the dog Nipper listening to a cylinder phonograph. This was later changed to a wind-up gramophone, and eventually was transformed into a silhouette.

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