9 December 2010 Last updated at 17:23

HMV shares fall sharply as losses widen

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Shares in HMV Group have slumped almost 17% after it reported falling sales and deepening losses.

The music, video, games and book retailer made a pre-tax loss of £41.3m in the six months to 23 October, compared with a £24.9m loss last year.

Like-for-like sales - which pulls out the impact of new store openings - at its main HMV UK business fell 16.1%.

Sales at its book chain Waterstone's were down 3.2%. HMV Group said Christmas sales would now be key.

At one point during the day its shares were down by as much as 29%. They later ended at 36.5 pence - the lowest closing price since the company's flotation in 2002.

Snow impact

HMV Group's revenues for the six months totalled £749.5m, down 6% from a year ago.

During the six months the company said it had worked hard to diversify the range of products available at its HMV stores, adding clothing lines and the sale of Apple's iPad tablet computer.

This came as the business saw a 10% fall in the sale of CDs, and an 8% decline in DVD sales. Sales of computer games dropped even further, losing 12%.

HMV said it would close the smaller of its two HMV stores on London's Oxford Street.

At Waterstone's, HMV Group said it was continuing efforts to make sure that the range of books on sale at individual stores was "tailored to each local market".

As for current trading in the UK, HMV Group said it had not been helped by the recent snow, saying this had "significantly affected customer footfall, and consequently makes trading patterns hard to determine at this stage".

'Desperation'

Simon Fox, HMV Group chief executive, said its HMV business was facing "tough trading conditions" in the UK, and that the firm's progress in product diversification "was not sufficient to offset weak entertainment markets".

HMV Group is also moving into the live music sector and now has 12 live music venues.

CD sales are continuing to fall

Like-for-like sales at HMV's overseas stores declined by 8.9%. This was led by HMV Canada, which saw a 10.2% fall. However, same-store sales were up 2.4% at HMV's seven stores in Hong Kong and Singapore.

Keith Bowman, equity analyst at Hargreaves Lansdown, said HMV was "paying the price for failing to embrace the internet much sooner".

He added: "These results do little to ease fears that HMV is slowly being consigned to the history books."

"Furthermore, moves to diversify the product offering smack of desperation, with competition in clothing and electrical products already hugely intense."