HMV sought insolvency protection last night, becoming the second big name retailer on the battered British High Street to come close to defeat in the first few weeks of 2013. This comes after the music retail giant spent several years struggling to turn its business around as customers have increasingly shifted to shopping online for CDs, DVDs and digital versions of those goods.
Trading in the company was suspended this morning as HMV - which is short for His Master's Voice - began its search for a buyer in earnest. The company opened its first store in London's Oxford Street 92 years ago in 1921 and carries the iconic "dog-and-gramophone" trademark.
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But its image has become somewhat tarnished in recent years as HMV has battled to compete with lower prices for entertainment products found online with such retailers as Amazon.
The plight of HMV has regularly appeared uncertain and its latest charge at flogging gadgets failed, ultimately, to rescue the store, which trades in the UK and the Republic of Ireland.
HMV said in a statement to the City:
On 13 December 2012, the Company announced that as a result of current market trading conditions, the Company faced material uncertainties and that it was probable that the Group would not comply with its banking covenants at the end of January 2013. The Company also stated that it was in discussions with its banks.
Since that date, the Company has continued the discussions with its banks and other key stakeholders to remedy the imminent covenant breach. However, the Board regrets to announce that it has been unable to reach a position where it feels able to continue to trade outside of insolvency protection, and in the circumstances therefore intends to file notice to appoint administrators to the Company and certain of its subsidiaries with immediate effect.
The Directors of the Company understand that it is the intention of the administrators, once appointed, to continue to trade whilst they seek a purchaser for the business.
Administrators from Deloitte LLP are expected to be brought in by HMV.
In 2011, the firm underwent a major refit of many of its stores to focus on selling fondleslabs and other tech gear.
HMV was forced to let go of the Waterstones book chain in 2011, after buying it in 1998 in a move to fix its financial problems. More recently, the company sold its Live division, which ran 13 venues and several music festivals including Lovebox and Global Gathering.
But it was clear by the end of Christmas 2012 that HMV was in trouble after reporting a possible breach of its bank loan agreements during the festive period.
While HMV has struggled for some years to turn its fortunes around - as other brick-and-mortar music sellers such as Tower Records and Virgin went under - the past 12 months have been by far the most tumultuous for the chain. In that time a new CEO - Trevor Moore - stepped up to the helm. He had previously been the boss of camera retailer Jessops. That outfit closed earlier this month, becoming the first High Street casualty of 2013.
Late last year, electrical goods vendor Comet shuttered its stores after the receiver it appointed was unable to find a buyer for the business as a going concern.
HMV has around 240 outlets throughout the UK and the Republic of Ireland and currently employs more than 4,000 people. ®