Business Matters: HMV Woes Signal Even Bigger Retail Changes Ahead
Business Matters: HMV Woes Signal Even Bigger Retail Changes Ahead

Troubled U.K. High Street retailer HMV has called upon the four major labels to help stave off its debt and cash flow crisis, according to U.K. press reports.

British broadsheet newspaper The Sunday Times has reported that HMV has asked EMI, Sony Music, Universal and Warner Music to consider allowing the retailer to buy catalog CDs on a sale-or-return basis, with only a nominal upfront payment. The paper estimates the move would save HMV approx £15 million ($24.5 million) in costs, which could then be used to pay off a portion of its £130 million ($212.7 million) debt burden.

The proposal is one of a number of options reportedly being discussed by HMV Group management to address the company's debt problems. Last week, HMV issued its third profit warning of the year, lowering its estimate for full year profit from £40m ($65.4 million) to £30m ($49 million).

As previously reported, the company is looking to offload its Waterstones chain of bookstores, as well as its loss-making Canadian arm. The company will also close approx 40 U.K. HMV stores this year, while it has until July 2 to meet the next test of its loan covenants.

The Sunday Times report quotes U.K. mass merchant Tesco as pursuing a similar sale-or-return arrangement with the majors, whereby the retailer pays as little as £0.50 ($0.82) per CD. Representatives for all four majors either declined to comment on this story or could not be reached at press time, but all clearly have an interest in helping the ailing retail chain, which remains the U.K.'s leading high street entertainment and music supplier.

Earlier this year, senior U.K.-based execs from Sony, Universal and Warners published an open letter in The Times newspaper pledging their support to HMV.

"There's a lot of media speculation around our situation right now - much of it ill-founded," an HMV spokesperson tells "However, it's no secret that U.K. record labels have expressed their desire to support us. They know how important it is to have a successful and vibrant specialist music and entertainment chain as one of their key distribution channels, so it goes without saying that we are working very closely with them in a mutually beneficial way."