Music retailer HMV files for insolvency after weak Christmas
Company entered insolvency for the second time in six years
Music and entertainment retailer HMV Group has become the first UK casualty of Christmas after disappointing sales over the holiday period.
The 97-year-old company, owned by restructuring firm Hilco Capital, entered insolvency procedures for the second time in six years, threatening 2,025 jobs. It previously suffered a near-collapse in January 2013, as the move toward online streaming services hit sales.
HMV’s 125 stores in the UK will stay open as the company negotiates with suppliers in the music and movie industries, according to a statement Friday. KPMG has been appointed as an administrator and a buyer is being sought, HMV said.
The shift away from CDs and DVDs to streaming services has only intensified since Hilco saved HMV six years ago, as Apple, Netflix and Spotify continue to dominate the battle for eyes and ears.
“During the key Christmas trading period the market for DVD fell by over 30 per cent compared to the previous year and, whilst HMV performed considerably better than that, such a deterioration in a key sector of the market is unsustainable,” Paul McGowan, executive chairman of HMV and Hilco, said in the statement.
HMV is the first victim of a dismal Christmas for British retail, which saw stores discounting from early December to try to offset competition from Amazon.com. Sports Direct International chief executive Mike Ashley warned of an “unbelievably bad” November, and spending power has been squeezed due to a low pound in the run-up to Britain’s exit from the European Union.
Mr Ashley this year rescued another British retail casualty, department-store chain House of Fraser. Its near-collapse followed the demise of electronics seller Maplin and the UK arm of Toys “R” Us and online retailer Asos issued a profit warning earlier this month.
The shift to digital entertainment has compounded the problem. HMV said it sold nearly one-third of physical music in the UKin 2018 but expects the market to shrink by 17 per cent in 2019.
“Even an exceptionally well-run and much-loved business such as HMV cannot withstand the tsunami of challenges facing U.K. retailers over the last 12 months on top of such a dramatic change in consumer behavior in the entertainment market,” Mr McGowan said in the statement.
The appointment of administrators, reported earlier by Sky News, comes just a couple of weeks after a formerly related Hong Kong entity moved to close all of its stores in the Chinese city. That business shut down its 102 stores in Canada in 2017.
Updated: December 28, 2018 05:01 PM