HMV branches sold to Hilco, saving 141 branches

The BBC's Ben Thompson looks at where it all went wrong for HMV

Restructuring specialist Hilco has clinched a deal to rescue music and DVD retailer HMV.

Hilco, which already owns HMV Canada, said it had acquired 132 HMV shops and all nine branches of the Fopp chain in a deal that could save 2,500 jobs.

HMV, the UK's last surviving national music retailer, collapsed in January after months of financial crisis.

It was hit hard by tough competition from online rivals, supermarkets and digital downloads.

No figure has been officially announced, but the deal is believed to be worth about £50m.

Hilco's chief executive, Paul McGowan, said the firm hoped to replicate its success with HMV Canada, which it acquired nearly two years ago and which he said was now "trading strongly".

He added: "The structural differences in the markets and the higher level of competition in the UK will prove additional challenges for the UK business, but we believe it has a successful future ahead of it."

Another Hilco executive, Ian Topping, said HMV would be reversing its decision to sell tablets and other devices in its stores, making way for "an enhanced music and visual range".

Start Quote

HMV employee Jane Carter

HMV missed too many opportunities. That's me talking as an employee who knows what the customers ask for and request”

End Quote Jane Carter Worked at HMV for six years
Underlying problems

At its peak, HMV had more than 400 outlets around the world, more than half of them in the UK.

But from 2007 onwards, a series of turnaround plans saw the retailer diversify into other areas, including a short-lived venture into live music venues, without solving its underlying problems.

HMV has been a UK retailer since 1921, when it opened its first shop on Oxford Street in London.

HMV is one of a number of UK High Street names that have suffered since the financial downturn began in 2007.

Woolworths, JJB Sports, electrical chain Comet, bookshop Borders and rival music chains Virgin (later Zavvi) and Tower have all disappeared from the landscape in recent years.

However, retail anlysts suggested the problems that caused the collapse of HMV remain.

"The trouble is that demand for CDs and DVDs is falling," Richard Perks from research firm Mintel told the BBC.

Analysis

Music fans in many of the UK's cities, towns and suburbs have already seen their local HMV close down, often leaving them without a local record shop at all.

But Hilco's rescue deal will grant a reprieve to the remaining outlets, as well as to the much-loved Fopp chain, which HMV saved from closure in 2007.

Most heartening of all is the news that HMV will now abandon its decision to dabble in gadget retail at the expense of music and movies, since diversification did it no favours on the High Street.

If it keeps its promise to enhance its range of CDs and DVDs, it can reach out to the many customers who still prefer physical product to the virtual kind.

"It's going to [online] streaming and...CDs and DVDs take up a lot of space, the turnover is low, the margin is low and the sales are falling."

But Kim Bayley, director general of the Entertainment Retailers' Association said there was cause for optimism.

"What we think will happen is you will see people using digital for throwaway music, that they may or may not like.

"But when they really want to collect the music and support the artist that they love, they will chose to buy CDs or maybe even vinyl."

Viable future?

Hilco plans to have its own people working alongside existing HMV management in the new set-up.

It said the Hilco team would be led by Mr Topping, formerly chief executive of the furniture retail group Steinhoff in the UK, and Henry Foster, an investment director at Hilco, while Mr McGowan would be chairman of the new business.

Peter Saville, partner at advisory and restructuring firm Zolfo Cooper, welcomed the news of the Hilco deal, describing it as "really positive news" for HMV and the wider UK retail sector.

He added: "Hilco understands the market well and is a seasoned High Street veteran. The news that HMV is to continue trading will also be welcomed by suppliers, as an over-reliance on online channels may be uncomfortable."

However, one property expert, Barry Gross of Berwin Leighton Paisner, raised the possibility that some of the 141 stores saved might not have a long-term future if their leases were not viable.

He said: "Whilst the headline of 141 stores makes for more positive reading than previous expectations, I suspect that the actual number which will ultimately continue to trade will be lower, as landlords refuse to or cannot meet the terms on which the new owner is prepared to accept a lease."

More on This Story

Music Retailing

The BBC is not responsible for the content of external Internet sites

More Business stories

RSS

Features & Analysis

Elsewhere on the BBC

  • StuntmanStuntman to the stars

    Driving dangerously and falling off buildings are all part of the day job for Bobby Holland Hanton

Programmes

  • A digger operated via an Oculus Rift and a controllerClick Watch

    Why controlling a heavy digger with a virtual reality helmet might improve safety

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.