After more than nine decades in business, British music and entertainment giant HMV is scrambling to stay afloat amid stiff competition from online retailers and digital downloading services.
The company announced Tuesday that it was suspending trading on the London stock exchange, as its shares fell to 1.1 pence on Monday, and called in officials from Deloitte to act as administrators to find a buyer for the business.
However, HMV Canada’s 113 stores are not affected because Hilco UK, a specialist in restructuring retail businesses, bought the Canadian operations for about $3.2 million in 2011. The parent company was looking to divest some of its overseas operations to shore up the sagging business.
“We were one of the first ones that agreed to go it alone,” said Nick Williams, HMV Canada president and CEO, in a telephone interview. “We had strong Christmas sales and a strong 2012. It was a stellar year.”
Same store sales for HMV Canada for the holiday period in 2012 were up 1.1 per cent over the 2011 season. Full year sales in 2012 exceeded $270 million.
Williams said the Canadian operations focused on core content including CDs, which make up 35 per cent of sales, and DVDs at 50 per cent. It also added gifts and collectibles, which have profit margins exceeding 50 per cent, as well as T-shirts.
By contrast, the U.K. stores got into the hardware technology businesses including tablets and games, which is a highly competitive segment with poor margins, he added.
While that may bring increased foot traffic, Williams believes it was the wrong strategy for U.K. operations, given how competitive that market is.
Hilco has been named as a potential buyer for the U.K. operations along with private equity firm Endless, and private equity veteran Jon Moulton, according to the Financial Times.
HMV U.K.’s 238 stores, some in high-rent city centres, including the flagship one on Oxford St. in London, which played a crucial part in the launch of the Beatles, will remain open for the time being. More than 4,000 people work for the chain.
The decision to call in administrators came after management failed to reach an agreement with lenders and suppliers to continue trading.
The name HMV, which stands for his master’s voice, comes from the company’s trademark of a dog named Nipper staring intently at the bell of an early gramophone player.
Over the years, the industry has changed, but it’s become even more pronounced in recent years. Fans no longer have to buy records or CDs to get music or DVDs for their favourite movies or television programs.
Instead, they can buy individual songs through an iTunes account or watch movies through streaming services like Netflix. And if they still want to buy a CD or DVD, cheaper options exist at discount retailers or online through stores like Amazon, which don’t pay high rents for bricks-and-mortar operations.
But Williams argues big box competitors or discount retailers only feature new releases and don’t hold the wide catalog of CDs or DVDs that a specialist chain like HMV can. And during the holiday season, CDs and DVDs are popular gift choices.
As well, he added Canadians still prefer to buy items in stores and are less likely than those in the UK or the U.S. to make online purchases.
Recently, HMV Canada launched a new subscription-based, streaming digital music service.
Despite steadily losing market share to Internet sellers, HMV still has about 20 per cent of the U.K. music and video market, which includes both downloads and discs.
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