Struggling entertainment chain sees shares slide more than 3% despite speculation around sale of live music arm
A seventh year of falling UK music sales dealt another blow to the HMV share price on Tuesday, which closed down more than 3% despite speculation surrounding the sale of its live music arm.
The entertainment chain is struggling to service a debt pile of more than £160m after sales of CDs, DVDs and video games fell sharply last year. The uphill task faced by the last national music and DVD chain was spelled out in the latest figures from the BPI, which showed sales of albums on compact disc dropping 12.6% in 2011.
Last month HMV's boss, Simon Fox, said it needed to sell HMV Live, its most profitable business, which operates 20 venues and festivals, to raise cash. Sky News reported Peter Dubens, founder of Oakley Capital, was interested in making an offer for the business that HMV paid £60m for two years ago. The entrepreneur's interest did not prevent HMV's shares closing down 0.12p at 3.35p.
Weak consumer spending throughout 2011 means HMV is not the only retailer facing a post-Christmas financial crunch. Millets-owner Blacks Leisure is set to be restructured and has already told shareholders that they will receive nothing. Four bidders are expected to lodge offers this week. The company, which operates 98 Blacks outlets and 208 Millets stores, is expected to be dunked into administration as part of the sale process.
The potential buyers, who which are thought to include Newcastle United owner Mike Ashley's Sports Direct chain, are expected to bid for most of the business, which also owns brands such as Peter Storm and Eurohike. A sale to another retailer such as Sports Direct would save jobs among the 3,600 staff, although the worst-performing stores are expected to close. The new owner is also expected to scale back Blacks' head office and warehouse in Northampton, which costs around £26m a year, including rent and staff wages, to run.