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HMV Falls Into Administration: The Rise And Fall Of The Much-Loved High Street Music Retailer

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HMV FALLS INTO ADMINISTRATION
UK high street favourite HMV has fallen into administration after more than two years of struggling on the financial precipice | Alamy

The British high street has suffered another casualty after music retailer HMV filed for administration in the late hours of Monday night.

But how was it allowed to fall so far from being the darling of the music industry and a high street favourite?

The rise and fall of HMV

The chain was founded in 1921 with the arrival of its flagship store on Oxford Street, London. The store was opened by British composer and conductor Sir Edward Elgar.

The famous logo, a copy of a painting showing Nipper the dog sitting next to a gramophone, was named "His Master's Voice".

During it's 93 years, HMV remained open even during the second World War; while parent company EMI found its building turned into a munitions factory, Oxford Street's HMV stayed open.

MORE: 5 Online Technologies That Killed HMV

After the dotcom boom in the late Nineties/early 2000s, HMV sought to diversify, and bought the book chain Waterstones in 1998.

By 2011 though, the writing for many was on the wall. HMV saw its Christmas like-for-like sales fall more than 8% in the last five weeks of the year, although sales in its newly refitted technology stores were up 51%, offering some hope that the stricken company's new strategy might yet pay off.

2012 - The beginning of the end

In July 2012, chief executive Simon Fox quit after six years at the company, telling the Financial Times: "I leave behind a business that has survived when many thought it wouldn't".

Fox was responsible for repositioning HMV being from a high street chain selling CDs and DVDs into a more diversified music retailer, offering headphones and other electronic equipment.

In the first three years of Fox's tenure, HMV's profits doubled as it ventured into new areas such as live music venues, buying the Hammersmith Apollo in London. But poor Christmas sales in 2010 led to it coming close to breaching its banking covenants, raising concerns for the chain's future.

Fox was replaced by replaced by Trevor Moore, the 43-year-old who stepped down as chief executive of Jessops. Jessops fell into administration last week.

Then in August 2012, Ian Kenyon joined as its financial director, a former Carphone Warehouse/Best Buy chief financial officer, but he was immediately hit with the news that video games sales were slumping by a fifth.

Even then, HMV claimed it would make a profit of at least £10 million by the end of the financial year, but sales were already sliding by 12% in the last 12 months amid fierce online competition.

HMV then hired former Game senior manager Andy Pinder to run its video game sales business. Pinder predicted "another fantastic Q4 product line up" but by September most analysts were counting the nails in HMV's coffin.

The interim sales report for Q3 showed a 11.6% sales slump in like-for-like sales, blamed by the management on a slow release schedule for new films, games and albums as entertainment firms waited for the Olympics buzz to die down.

Mintel called the results "truly dreadful", Redmayne Bentley warned the group had "a long way to go to make up this heavy decline and return to profit" and Charles Stanley said even a good festive trading period wouldn’t be enough to restore the company's fortunes entirely.

Christmas 2012 saw the last roll of the dice – a roll out of a dozen pop up stores were opened in locations around the country to inspire impulse purchases. Analysts were unimpressed – saying pop ups were only a "nice to have", not a solution, and that the digital encroachment being felt thanks to online giants such as Amazon was too great a problem for HMV to fight.

By December, Trevor Moore was forced to admit he had opened talks with banks about its future after worse-than-expected trading in the run up to Christmas.

Selling off the Hammersmith Apollo and Waterstones hadn't been enough – it had lessened its debt pile, but not by enough.

The terms of its bank loans are not likely to be met in January and April, he said, with like-for-like sales falling 10.2% in the 26 weeks to 27 October.

Even at this dark hour, Moore maintained that going into administration was "not part of our plan" and insisted HMV had grown its market share, despite the tough economic climate.

Fast forward to Monday night, and reports started appearing that HMV had finally called the administrators in. Today, HMV has 238 outlets and 20 live entertainment venues and festivals, employs more than 4,000 people and operates from entertainment stores and websites in the UK and Ireland, Hong Kong and Singapore.

Around the Web

HMV calls in the administrators - FT.com

4,000 jobs at risk as HMV set to go into administration (From The ...

HMV expected to enter administration as soon as Tuesday (Wired UK)

HMV | Business | The Guardian

HMV administration announcement puts Hatfield jobs at risk - News ...

HMV falls into administration

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