HMV gets profit boost from rivals demise
LONDON - British music and books retailer HMV Group Plc forecast full-year profit at the top end of market hopes, boosted by the demise of rivals Woolworths and Zavvi, sending its shares higher on Wednesday.
“Management is confident that group profits before tax and exceptional items will be towards the upper end of market expectations,” HMV said in a trading update.
The company said analyst forecasts were pitched at between 50.3 million pounds to 63.7 million pounds (($74 million-$94 million) for its year to April 25. In 2007-08, HMV made 56.6 million pounds profit.
Shares in HMV have increased in value by 18 percent over the past year, outperforming the UK’s general retail index by 31 percent.
The stock was up 5.25 pence, or 3.5 percent, at 155.5 pence, at 0734 GMT, valuing the business at 660 million pounds.
The 88-year-old retailer, which runs music, DVD and video games shops under its own name as well as Waterstone’s bookstores, said underlying sales in the 16 weeks to April 25 were flat year-on-year, ahead of analysts’ forecasts of a fall of about 1.5 percent.
Sales at HMV UK and Ireland shops open at least a year were up 4.3 percent, reflecting “double digit” volume growth in music and DVDs, aswell as continued growth in video gaming despite a softening of this market since Christmas.
“We’re working hard to take advantage of the opportunities arising from the changes to our competitive landscape that have taken place since Christmas,” Chief Executive Simon Fox told reporters.
The group, which has acquired 23 former Zavvi stores, is in the midst of a three-year turnaround plan aimed at meeting the challenge of competition from Internet retailers and supermarkets, as well as the rise of music and film downloads.
Amid a downturn in consumer spending, rivals Woolworths and Zavvi failed to cope, with both groups entering administration late last year.
Woolworths and Zavvi had accounted for 20 percent of UK CD sales and 15 percent of DVD sales.
Waterstone’s like-for-like sales fell 4.5 percent over the 16 week period, reflecting an overall book market down about 4 percent.
“Nevertheless, Waterstone’s has broadly maintained market share over the last 12 months,” Fox said.
Underlying sales at HMV’s international businesses were down 9.3 percent.
The group forecast year end net debt of about 10 million pounds.