HMV UK stores go into administration on 28th December 2018 with KPMG appointed as administrators to HMV Retail Ltd and HMV Ecommerce Ltd. HMV operates 128 stores across the UK including 9 which operate under the Fopp brand. The administration which is the second time in 6 years puts 2,200 jobs at risk and is the latest in a series of UK retail failures in 2018 which have included House of Fraser, Poundland, Toys ‘R’ Us and Maplin.
The collapse of HMV UK comes only weeks after the announcement that HMV in Hong Kong was to close. Although the companies are no longer financially connected, they share a similar business model and their collapse reflects the increase in streaming and the decline of physical recorded music sales.
The administrators will continue to trade the business as a going concern while they assess options for the business.
Will Wright, partner at KPMG and joint administrator, said: “For decades, HMV has been one of the most iconic names on the high street. Whilst we understand that it has continued to outperform the overall market decline in physical music and visual sales, as well as growing a profitable ecommerce business, the company has suffered from the ongoing wave of digital disruption sweeping across the entertainment industry. This has been in addition to the ongoing pressures facing many high street retailers, including weakening consumer confidence, rising costs and business rates pressures.
“Over the coming weeks, we will endeavour to continue to operate all stores as a going concern while we assess options for the business, including a possible sale. Customers with gift cards are advised that the cards will be honoured as usual, while the business continues to trade.”
HMV was founded in 1921 and over 97 years has sold a range of products including audio, books, CDs, DVDs, video games, as well as an increasing range of movie, television and music merchandise. The company was rescued by Hilco, a restructuring company, when it went into administration for the first time in 2013. Paul McGowan, the executive chairman of HMV and Hilco, said the decline in the CD and DVD market had made the situation in the UK impossible.
“During the key Christmas trading period the market for DVDs fell by over 30% compared to the previous year and while HMV performed considerably better than that, such a deterioration in a key sector of the market is unsustainable,” he said.
“HMV has clearly not been insulated from the general malaise of the UK high street and has suffered the same challenges with business rates and other government-centric policies, which have led to increased fixed costs in the business.
“Business rates alone represent an annual cost to HMV in excess of £15m. Even an exceptionally well-run and much-loved business such as HMV cannot withstand the tsunami of challenges facing UK retailers over the last 12 months, on top of such a dramatic change in consumer behaviour in the entertainment market.”
Kim Bayley, the chief executive of the Entertainment Retailers Association, said it had been “a tough fourth quarter for retailers” and that other retailers could also be facing serious problems but she insisted there was still a place for shops selling CDs and DVDs: “The fact is the physical entertainment market is still worth up to £2bn a year, so there is plenty of business there.”
HMV made a pre-tax loss of nearly £8.8m in the year to January 2017, growing from £8.4m a year before. Turnaround experts suggested KPMG will find selling HMV in its entirety as a going concern a tough proposition but there a number of profitable stores giving them the options of selling these off or restructuring to a slimmed down business.
