Member Article

HMV call in administrators

Struggling music store HMV is expected to call in administrators on Tuesday after months of financial woes.

Reports said that a board meeting on Monday night resulted in the company appointing Deloitte as administrators, putting approximately 4,3500 jobs at risk.

HMV gave warning in its interim results at the beginning of December that a 13.5% drop in sales and a “disappointing” live music schedule could result in a breach of banking covenants.

If HMV closes its doors, 238 high street stores will close, alongside 9 Fopp stores, which are owned by the firm.

The music retailer sold off its live music division “MAMA Group” on 3rd December, and suppliers pledged £40m to buoy the company on the 13th of the same month.

Despite this help, reports say that HMV asked for a further £300m to support its business model, but could go into administration as early as Tuesday morning.

Chief executive, Trevor Moore, who is also former head of failed store Jessops, said in HMV’s interim results the store’s survival would depend on its performance during the Christmas shopping period. No official word has yet been released.

Ajay Bhalla, Professor of Global Innovation Management at Cass Business School, commented: “While the likes of iTunes and Amazon were emerging in the US, British retailers dismissed the online world as fanciful.

“Not only did HMV fail to wake up to the reality of the shifting retail landscape from high-street to online in the late 1990s, it also failed to transform its business model when new players entered the market.

“While relying on the high-street to generate its cash flow, it never made a serious attempt in generating new revenue streams.

“For instance, it failed to strike partnerships with emerging platform providers, and made no attempt to challenge its status quo.

“HMV’s demise should serve as a wake-up call for the remaining UK high street retailers, many of whom continue to rely on Amazon to revive their fortunes.”

The store confirmed it will appoint administrators Nick Edwards, Neville Kahn and Rob Harding, partners of Deloitte LLP, and said stores will remain open.

In a statement, HMV said: “On 13 December 2012, the Company announced that as a result of current market trading conditions, the Company faced material uncertainties and that it was probable that the Group would not comply with its banking covenants at the end of January 2013.

“The Company also stated that it was in discussions with its banks. Since that date, the Company has continued the discussions with its banks and other key stakeholders to remedy the imminent covenant breach.

“However, 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, and in the circumstances therefore intends to file notice to appoint administrators to the Company and certain of its subsidiaries with immediate effect.

“The Directors of the Company understand that it is the intention of the administrators, once appointed, to continue to trade whilst they seek a purchaser for the business.”

This was posted in Bdaily's Members' News section by Miranda Dobson .