Saturday 6 April 2013

HMV branches sold to Hilco, saving 141 branches

Restructuring specialist Hilco has clinched a deal to rescue music and DVD retailer HMV.

Hilco, which already owns HMV Canada, said it had acquired 132 HMV shops and all nine branches of the Fopp chain in a deal that could save 2,500 jobs.

HMV, the UK's last surviving national music retailer, collapsed in January after months of financial crisis.

It was hit hard by tough competition from online rivals, supermarkets and digital downloads.

No figure has been officially announced, but the deal is believed to be worth about £50m.

Hilco's chief executive, Paul McGowan, said the firm hoped to replicate its success with HMV Canada, which it acquired nearly two years ago and which he said was now "trading strongly".

He added: "The structural differences in the markets and the higher level of competition in the UK will prove additional challenges for the UK business, but we believe it has a successful future ahead of it."

Another Hilco executive, Ian Topping, said HMV would be reversing its decision to sell tablets and other devices in its stores, making way for "an enhanced music and visual range".

Underlying problems

At its peak, HMV had more than 400 outlets around the world, more than half of them in the UK.

But from 2007 onwards, a series of turnaround plans saw the retailer diversify into other areas, including a short-lived venture into live music venues, without solving its underlying problems.

HMV has been a UK retailer since 1921, when it opened its first shop on Oxford Street in London.

HMV is one of a number of UK High Street names that have suffered since the financial downturn began in 2007.

Woolworths, JJB Sports, electrical chain Comet, bookshop Borders and rival music chains Virgin (later Zavvi) and Tower have all disappeared from the landscape in recent years.

However, retail anlysts suggested the problems that caused the collapse of HMV remain.

"The trouble is that demand for CDs and DVDs is falling," Richard Perks from research firm Mintel told the BBC.

"It's going to [online] streaming and...CDs and DVDs take up a lot of space, the turnover is low, the margin is low and the sales are falling."

But Kim Bayley, director general of the Entertainment Retailers' Association said there was cause for optimism.

"What we think will happen is you will see people using digital for throwaway music, that they may or may not like.

"But when they really want to collect the music and support the artist that they love, they will chose to buy CDs or maybe even vinyl."

Viable future?

Hilco plans to have its own people working alongside existing HMV management in the new set-up.

It said the Hilco team would be led by Mr Topping, formerly chief executive of the furniture retail group Steinhoff in the UK, and Henry Foster, an investment director at Hilco, while Mr McGowan would be chairman of the new business.

Peter Saville, partner at advisory and restructuring firm Zolfo Cooper, welcomed the news of the Hilco deal, describing it as "really positive news" for HMV and the wider UK retail sector.

He added: "Hilco understands the market well and is a seasoned High Street veteran. The news that HMV is to continue trading will also be welcomed by suppliers, as an over-reliance on online channels may be uncomfortable."

However, one property expert, Barry Gross of Berwin Leighton Paisner, raised the possibility that some of the 141 stores saved might not have a long-term future if their leases were not viable.

He said: "Whilst the headline of 141 stores makes for more positive reading than previous expectations, I suspect that the actual number which will ultimately continue to trade will be lower, as landlords refuse to or cannot meet the terms on which the new owner is prepared to accept a lease."

Source: BBC

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