Music company HMV was sent into administration for the second time in within six years which has put at risk about 2200 jobs.
At high court hearing late on Friday evening, insolvency experts from the accountancy firm KPMG as joint administrators were appointed by the company that is a music and film retailer and one that accounts for almost a one third of sale of all physical music in the UK and almost one forth of total sale of DVD. The objective of the insolvency experts is to either find a buyer for the company or close it down completely.
“A tsunami of challenges” is being faced by all types of retailers, HMV said and added that business in the festive season had been “extremely weak”. The company also said that there was a drop of 30 per cent year on year in the sale of DVDs across the market. While talks with suppliers and potential buyers continue, the 125 UK stores of the company will remain open.
“Whilst we understand that [HMV] has continued to outperform the overall market decline in physical music and visual sales, as well as growing a profitable ecommerce business, the company has suffered from the ongoing wave of digital disruption sweeping across the entertainment industry. This has been in addition to the ongoing pressures facing many high street retailers, including weakening consumer confidence, rising costs and business rates pressures,” Will Wright, partner at KPMG and joint administrator, said.
“Over the coming weeks, we will endeavour to continue to operate all stores as a going concern while we assess options for the business, including a possible sale. Customers with gift cards are advised that the cards will be honoured as usual, while the business continues to trade.”
However, a call for everyone who had HMV vouchers to spend them quickly was issued by Alex Neill from a consumer group. “If you have recently bought anything from HMV, you may not be able to claim a refund or exchange the item if the company ceases trading.”
When this 97-year-old retailer had collapsed back in 2013, it had been rescued by Hilco – a reconstruction company. HMV also owns the nine-store Fopp chain.
The business situation in the UK had been made impossible because of the decline in the CD and DVD market, said Paul McGowan, the executive chairman of HMV and Hilco.
“During the key Christmas trading period the market for DVDs fell by over 30% compared to the previous year and while HMV performed considerably better than that, such a deterioration in a key sector of the market is unsustainable,” he said.
“HMV has clearly not been insulated from the general malaise of the UK high street and has suffered the same challenges with business rates and other government-centric policies, which have led to increased fixed costs in the business.”
“Business rates alone represent an annual cost to HMV in excess of £15m. Even an exceptionally well-run and much-loved business such as HMV cannot withstand the tsunami of challenges facing UK retailers over the last 12 months, on top of such a dramatic change in consumer behaviour in the entertainment market.”
(Adapted from TheGuardian.com)