By Hannah Benjamin
LONDON—U.K. entertainment retailer HMV Group PLC on Thursday refused to rule out store closures, following a much wider first-half loss as it continues to struggle against cheaper rivals.
Its pretax loss in the 26 weeks to Oct. 23 widened by 66% to £41.3 million ($54.6 million) from a £24.9 million pretax loss a year earlier as revenue fell 6% to £749.5 million from £797 million.
The firm, which trades from 412 HMV stores, 10 Fopp stores and also owns Waterstone's bookstores, said sales in the U.K. and Ireland plunged 15% and international sales were down 9.8% at constant exchange rates.
"We've been working to get flexibility of our leases and the average rent term is now six years ... The property portfolio is something we've said we will review and we will keep it as flexible as possible," Chief Executive Simon Fox told journalists on a conference call. Only last month the company sold the lease to its store on London's iconic Oxford Street to a U.S. fashion retailer for £13.75 million in cash.
Increased competition from supermarkets like Tesco PLC and online rivals—which typically have fewer costs and so can often sell books and games for les—has forced HMV to try and reposition itself away from selling CDs and DVDs in favor of more technology products and entertainment-inspired fashion. It has also tapped in to the live music market after buying out venue owner MAMA Group PLC, following an earlier joint venture.
It briefly got a boost from the shift in the marketplace following the demise of rivals Zavvi and former high-street stalwart Woolworths. But Matt Piner , a senior retail analyst at Verdict Research, said HMV now seems destined for the same fate.
"The long-term trend of more people turning to the likes of Amazon and the grocers has continued and with no more collapsed rivals from which to hoover up share, HMV is now feeling all the pain from the shrinking market in one go."
Hargreaves Lansdown /zigman2/quotes/201025857/delayed UK:HL +2.69% analyst Keith Bowman was equally bearish, telling clients in a note: "These results do little to ease fears that HMV is slowly being consigned to the history books."
CEO Mr. Fox remained positive. "We're still expecting to have a strong, profitable year," he told reporters. "We're hopeful that the Christmas period will be a strong one. We've still got 60% of our year ahead of us."
Recently, HMV shares were trading 27%, lower at 32 pence. The company halved its interim dividend to 0.9 pence a share from 1.8 pence a share a year earlier. It said its cash outflow in the period increased to £79 million from £48 million, reflecting the impact of tough trading on profits and working capital timing.
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