Troubled British retailer HMV has forecast a pre-tax loss of £16 million ($25.9 million) for the year ending April 28, blaming a "weak new release schedule in CDs and DVDs" in the fourth quarter for the lower than expected sales.
The retailer had previously forecast a year-end pre-tax loss of £10 million ($16.2 million). HMV Group, which also includes its profitable live arm HMV Live, expects year-end net debt to be approximately £168 million ($271.9 million), representing an improvement on its £180 million ($291.4 million) debt forecast the previous quarter.
HMV did, however, state that it was confident of returning to profitability in the forthcoming financial year, forecasting pre-tax profits of "at least £10 million" ($16.1 million)" for 2012/13. Analysts quoted in the official "HMV Group Pre-Close Update" were less optimistic, predicting a pre-tax loss of around £5 million ($8 million).
As previously reported, HMV marginally grew its share of the U.K. entertainment market in the three-month period ending March 18 2012, according to market research firm Kantar Worldpanel. Kantar's latest figures state that HMV's share of the U.K. entertainment market climbed to 19.2%, up from 17.5% the previous quarter. Amazon remains the U.K.'s leading entertainment retailer with 19.9% market share.
Despite its apparent growth in market share, HMV's retail operations posted a 19.2% fall in sales in the 17-week period ending April 28 2012. Like-for-like sales (which strip out the effects of shop closures) dropped 12.9%, with the company citing "a very weak January" as a key contributor. HMV Group total sales dropped 18.3% for the 2011/12 financial year (like-for-like sales 11.4%).
HMV Live like-for-like sales grew 2.7% in quarter four. Total year-end sales for the profitable live division grew 5.4% in 2011/12. Having previously announced its intention to sell HMV Live to help service the company's debt obligations, HMV is currently negotiating with several interested buyers. "Further announcements will be made as and when appropriate," says HMV.
Meanwhile, the recent downsizing of U.K.-wide video game retailer Game is widely expected to boost HMV's sales performance in the year ahead. HMV also cites the "changed nature of our relationship with key music and film suppliers" as helping to instil confidence in future operations. As previously reported, the company agreed a new deal with banks and suppliers in January that aimed to halve its debts in the next three years.
"The last year has been a difficult and challenging one for HMV and this will be reflected in our annual results," said chief executive Simon Fox in a statement. "However, we are confident that the actions we have taken will enable us to significantly improve our profit and cash generation in the year ahead," he went on to say.