HMV rules out rights issue as sales drop
HMV emphatically ruled out the option of raising much-needed cash through a rights issue yesterday as the struggling entertainment retailer reported that its fortunes had continued to plummet in the past 18 weeks.
Revealing a 15.1 per cent like-for-like sales slump for the period – accelerating from a 14.5 per cent drop in the year to 30 April – its chief executive Simon Fox ruled out the possibility of a rumoured equity issue, at least until HMV delivered a "sharply improved performance".
Mr Fox said he was "more confident now than when we last spoke in May" – at the release of HMV's disappointing annual results – but conceded that the continuing desertion of CD and DVD buyers from the high street presented a tough long-term outlook.
"It is not on the table today. We do not have an equity story today," Mr Fox said. "I'm not saying never, but we need a compelling story to tell and a sharply improved performance."
HMV, whose logo shows "Nipper the Dog" listening to a gramophone, has issued four profit warnings this year and its shares have fallen by about 90 per cent in the past 12 months. It has also been forced to sell its Waterstone's bookstore chain and its Canadian business to raise cash.
The retailer is in the process of closing 40 of its remaining 256 UK branches and has nearly finished rolling out a new-look technology-focused store format to 150 outlets. These branches give a lot more space to items such as headphones, tablet computers, digital MP3 music players and the speaker docks they can plug into for use in the home.
Mr Fox said underlying sales at the six stores in which HMV piloted the technology store concept had been 8 percentage points higher than for the chain as a whole.
Freddie George, an analyst at Seymour Pierce, said: "We maintain our sell recommendation as we continue to believe that the business is a value trap and management will struggle to grow profitability."