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HMV sales fall by 10%, Avatar releases on DVD
Avatar is released on DVD in the UK this week.
Sales of music, DVDs and computer games have gone into reverse at high street chain HMV and the retailer is hoping that big forthcoming releases such as the movie Avatar and a new Amy Winehouse album to stop the rot.
The group, which operates 400 HMV stores and some 300 Waterstone’s book stores, said like-for-like sales across the group were down more than 10% in the first four months of the year. However, HMV’s outlets in Britain and Ireland performed far worse. Like-for-like sales in those outlets were down 13.2%.
Chief executive Simon Fox blamed the downturn on bad weather at the turn of the year, which kept shoppers at home, and a tough comparison with strong trading figures a year ago. He also pointed to a cutback in promotional activity designed to protect profit margins, which are expected to be up about 50 basis points for the full year.
At Waterstone’s, like-for-like sales since the new year were down 4.8% – an improvement on the chain’s poor Christmas trading, despite the weather.
Fox described the final four months of the group’s financial year as difficult, but stressed that City profit expectations would be met as a result of a clampdown on costs and the cutback in promotions.
HMV’s gloomy update followed a slump in profits at one of its rivals, videogame chain Game Group, last week that prompted the abrupt departure of its two most senior executives. Lisa Morgan and Terry Scicluna left after announcing profits had fallen by almost a third.
HMV shares lost 6.8p, or 8.6%, to close at 72.3p. Twelve months ago they were changing hands at around 150p and Fox was being lauded for transforming the group. By the summer he was being courted by ITV to take over as its new boss, but pulled out of the running, telling the broadcaster he wanted to complete his turnaround of HMV and was only two years through his three-year task.
HMV gained last year from the collapse of Woolworths and Zavvi, but is being squeezed by supermarkets, online rivals and by the shift to digital downloads for computer games as well as music.
Fox said this year’s schedule of DVD and CD releases was likely to provide a sales boost. The science-fiction epic Avatar, released in the UK this week, has smashed sales records in the US. Other movies due on DVD include Sherlock Holmes, starring Robert Downey Jr, and Toy Story 3. Music releases due include albums from Duffy, Amy Winehouse and Cheryl Cole.
HMV has been moving into new areas such as cinemas, music venues and ticketing, and today announced a venture into the cut-throat world of fashion, or what it called “entertainment-inspired clothing”. Nonetheless, some analysts warn that none of these activities can make up for the declines in its core business. Kate Calvert at Shore Capital said she did “not expect recent diversifications into live music and ticketing to offset the decline of its core business over the medium term.”
But Freddie George at Seymour Pierce rates HMV shares a buy as a result of the forthcoming release schedule, the contribution from new business activities and a recovery at Waterstone’s.
Best Buy brings ‘big box’ retailing to Britain
Best Buy is offering customers everything from a £90,000 Tesla electric car to the Apple iPad. Photograph: Justin Sullivan/Getty
British shoppers look set to benefit from lower priced electronic goods as Carphone Warehouse imports the American fashion for ‘big box’ stores with the opening of its first Best Buy outlet later this week.
Selling everything from £90,000 Tesla electric sports cars to the latest 3D flatscreen TVs, affordable digital cameras and, of course, mobile phones, the 45,000 square foot store in Thurrock, Essex is a little slice of American retail in the shadow of the Dartford Crossing.
The more than 100 blue polo shirt-wearing staff are not paid on a commission basis, instead their bonuses are based on the store’s overall performance, which may help explain why at a ‘friends and family’ event earlier in the week one member of the store’s television department spent four and a half hours helping a single customer.
“It is a very, very different experience, format and quality of sales person our customers will come across in this store,” Carphone Warehouse chairman Charles Dunstone said as he showed press and City analysts around the store. “We have taken every consumer product we could sell and focused on the best in class.”
To pull in the punters, the store will have a range of special bank holiday bargains available when the doors open at 7.30am on Friday, alongside a number of exclusive products – such as a white Samsung flatscreen TV. Managers are planning a prime location to display the Apple iPad when it comes to the UK next month.
While Dunstone and the team are giving nothing away about actual pricing, the store is expected to add fuel to an already smouldering price war in electronics. Last week, Tesco announced that it plans to roll out its “tech team” service, which has boosted non-food sales by more 10% in trial stores, as it looks to meet the Best Buy threat. The supermarket is already on course to overtake Comet as the UK’s third largest electricals retailer next year.
But Dunstone believes Best Buy has an advantage over supermarkets because, as devices have become more complicated, retailers need to spend more time with customers to understand what they want and to ensure that when they get everything home it all works together seamlessly.
“This is undoubtedly the most exciting place to be in any consumer market and we are trying to bring that to life for people. It’s not about buying a box and taking it home and plugging it in by itself any more, it’s about the connected home.”
Best Buy is also offering customers the chance to trade-in their old technology including mobile phones, computers, TVs and even fridges – though it does not expect many people to walk in carrying one. “We want to put the customer at the heart of the store, not the product,” Dunstone explained.
His promise appeared to be borne out by one of the store’s blueshirts, ‘Lloyd’, who works across the TV, computer and mobile phone departments at the Thurrock store and used to work for PC World, part of DSG International. “The way we have been taught is so different from being at PC World. There it was all ‘buy, buy, buy’, here you’ve got to make the customer’s experience the best you can.”
The Thurrock store is the first of eight or nine which Carphone Warehouse will open before the end of March next year under its joint venture with the US retailer announced two years ago. The company still hopes to have about 100 across Europe by 2014.
Carphone Warehouse, which was spun off from internet service provider TalkTalk last month, upgraded its profit projection for the financial year just ended, the third increase in six months, as a result of a better than expected performance in the US. Chief executive of the company’s Carphone Warehouse stores, Andrew Harrison, explained that sales of smartphones have been very strong, especially in the US, while Google’s Android operating system is finally coming of age.
“The market for Android devices has really taken off in the last three months,” he explained, adding that in the three months to end March – the firm’s fourth quarter – half of all handsets sold to UK customers signing long-term contracts were smartphones, nine months ago the figure was under 20%. The company expects two-thirds of all the phones its sells this year to be ‘smart’ – essentially meaning that they can download applications.
Over a decade ago, Dunstone and Harrison used to visit Best Buy stores in the US on their annual trips across the Atlantic to check out new retail trends.
“I used to say, wouldn’t it be brilliant if we could bring this to the UK, Harrison said. Asked why it has taken so long for ‘big box’ stores to come over, Dunstone responded: “I’m not sure me and Andrew in our short pants knocking on the door asking ‘can we bring your format to the UK’ would really have got a great reception a decade ago.”
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