Beleaguered UK retailer HMV announced yesterday that they have called in the administrators, with 4,500 jobs at risk if the company can’t be rescued by a buyer.
The news comes in the same week as another famous UK retailer Jessops entered administration and closed all of its stores last Friday. It’s been a tough time for UK retailers as electrical chain Comet also went into administration at the tail-end of last year.
The writing has been on the wall for sometime for HMV; sales numbers have been falling as a result of consumers going online to buy cheaper CDs, DVDs and electronics. They also failed to recognise the threat from supermarkets and the rise of digital distribution services like Netflix and LoveFilm.
Recently HMV tried to turn around its fortunes by diversifying and selling big-ticket items like Android tablets and iPads. However, this plan has failed to save the retailer and they’ve finally succumbed to its creditors demands who were unwilling to let the company trade as an ongoing concern.
The firm said last night that it would appoint Deloitte as administrators, with stores remaining open while a buyer for the brand is looked for.
A statement given to Music Week last night said: “On 13 December 2012, [HMV] 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.”
HMV currently employs around 4,3000 people in the UK and has over 230 stores across the country. For the time being, it’s business as usual as administrator tries to find a buyer for the retailer – but considering they didn’t find one for Comet, it’s hard to say whether a buyer will be found, and certainly not for all of its locations.
Andy Heath, the chair of UK Music, said the music industry “certainly” wants to see HMV continue its traditional brick and mortar business, but warned the retailer would need to implement sweeping changes in order to continue as a viable business.
“There is still significant and very large demand for people wanting to buy music in the high street,” he said, speaking on Radio Four’s Today Programme.
“I think there is a place for a chain but the chain needs to be focussed in a way that HMV was unable to be.
“Going into administration gives HMV an opportunity for a substantial and decent rebirth.”
Mr Heath reckons there’s still a place for the retailer, but only as a smaller, more nimble retailer with far fewer stores so it can try and compete with rivals like Amazon and iTunes.
As part of a recent deal with its suppliers, Universal Music is liable for the rent on 14 of HMV’s 238 stores, after buying the former retailer’s parent company EMI this year.
Ian Kenyon, chief financial officer at HMV, said the chain’s suppliers had been “amazingly supportive” and were “working hard” to try to find a future for HMV on the high street.
HMV is the last music retailer left on the UK’s high street, as shows just how much consumers buying habits have changed over the last decade – it might be the UK’s biggest seller of music, but every year it’s losing ground to services like iTunes and is constantly undercut by rivals like Play.com and Amazon.com.
No single buyer has yet to emerge, as it was thought Private equity firm Apollo Management was thought to be considering a bid as they bought 10% of HMV’s debt in December, but has since gone on record to say they would not be buying the chain.
HMV’s demise looks to continue a worrying trend on UK high streets as chains JJB sports, Jessops and Comet have all disappeared in less than 12 months.
HMV has confirmed it will not be accepting gift cards or vouchers from customers as the retailer prepared to collapse into administration.