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HMV predicts return to profit HMV predicts return to profit
(about 3 hours later)
HMV, the embattled high street entertainment chain, says it will return to profit this year as it takes advantage of the collapse of rival Game.HMV, the embattled high street entertainment chain, says it will return to profit this year as it takes advantage of the collapse of rival Game.
In a trading update to the City on Friday, HMV said that like-for-like sales were down 12.9% in the 17 weeks to 28 April and that it would make a loss of £16m for the financial year just ended. It blamed too few blockbuster CD and DVD releases in the three month run-up to Christmas. In a trading update to the City on Friday, HMV said that like-for-like sales were down nearly 13% in the last three months and that it would make a loss of £16m for the financial year just ended. It blamed a dull line-up of CD and DVD releases in the run-up to Christmas.
However the group said that it could return to profit this financial year and forecast it would make "at least £10m". However the group said it could return to profit this year and forecast it would make "at least £10m".
The chief executive, Simon Fox, said: "The last year has been a difficult and challenging one for HMV and this will be reflected in our annual results. However, we are confident that the actions we have taken will enable us to significantly improve our profit and cash generation in the year ahead."The chief executive, Simon Fox, said: "The last year has been a difficult and challenging one for HMV and this will be reflected in our annual results. However, we are confident that the actions we have taken will enable us to significantly improve our profit and cash generation in the year ahead."
Analysts were expecting a £5m loss this year after a disastrous period for the retailer that saw Fox pin some of his hopes for growth on selling headphones and other accessories to replace falls in computer games and CDs. Analysts had been expecting a £5m loss this year after a disastrous period for the retailer that saw Fox pin his hopes for growth on selling headphones and other accessories to make up for plunging sales of computer games and CDs.
A massive debt pile built up during the boom has weighed heavily on the company's finances and encouraged some analysts to predict the firm's demise. A boom in sales from Guernsey and Jersey, avoiding UK VAT, orchestrated by rivals including Amazon, also hit the company's finances. A massive debt pile built up during the boom has weighed heavily on the company's finances and earlier this year it looked headed for collapse. A boom in sales from Guernsey and Jersey, avoiding UK VAT, orchestrated by rivals including Amazon, also hit the company's finances.
But the collapse of rival Game proved a major boon for Fox and followed successful talks with major suppliers to provide more preferential terms for CDs and games. Game has since been rescued by a private equity group and 333 of its 610 shops saved, though the interruption to its business was significant. But the collapse of rival Game has provided a major boost for Fox and followed successful talks with major suppliers to prop up the chain with preferential terms for CDs and games. Game has since been rescued by a private equity group and 333 of its 610 shops saved, though the interruption to its business was significant.
It appears Fox used HMV's status as the last mainstream presence on the high street for the four major music publishers to extract major concessions. Allowing HMV to go bust would rob Sony, Universal, EMI and Warner Music Group of a shop window in the UK following the disappearance of Zavvi and Woolworths from the high street. Each of the big four took a small stake in the business. Fox has used HMV's status as the last mainstream presence on the high street for the four major music publishers to extract major concessions. Allowing HMV to go bust would rob Sony, Universal, EMI and Warner Music Group of a shop window in the UK following the disappearance of Zavvi and Woolworths from the high street. Each of the big four supported a rescue and took a small stake in the business.
Fox also struck a deal with the firm's banks in January and believes earlier predictions of £168m net debt by the end of the financial year to 28 April will prove too pessimistic.Fox also struck a deal with the firm's banks in January and believes earlier predictions of £168m net debt by the end of the financial year to 28 April will prove too pessimistic.