More on HMV
HMV: full year trading statement
Despite supposedly successful new pricing and promotions HMV’s sales continue to decline. Group sales fell 5.7% like-for-like and, despite expansion, total sales fell 1.5% (both at CER). Sales toward the year end (i.e. since the period covered by the Christmas trading statement) worsened slightly.
As in the first half, a reasonably like-for-like performances in Asia (+8.5%) and Canada (+4.5%) were more than offset by the slide in the core UK business (-10.8%)
HMV has also announced that Waterstones it is launching its own book sales website to replace the co-branded version of Amazon that it currently offers. Amazon are very good at e-commerce and HMV face a tough challenges in delivering as good a product.
Tim Waterstone and another member of the consortium that were interested in buying Waterstones from HMV released a statement today that effectively accused HMV of being unreasonable in the conditions they imposed on considering the offer. HMV does seem to want to go out of its way to block any offer for Waterstones, and this we regard as reducing the value to shareholders as it will mean missing opportunities to release shareholder value.
At 173p the price of HMV shares has not changed since we commented on the Christmas trading statement. The 10× prospective PE with a 3.9% yield may look like a bargain, but this is a declining business. Book and music sales are increasing shifting to the internet, where HMV is not a particularly strong competitor so we expect the declines to continue.
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