HMV plans UK expansion drive
Entertainment retailer strong in core market
July 1 2003
New store openings and a better market share in the fast-expanding DVD market has seen HMV Group grow sales by more than 10 per cent in its core UK market.
The company has started a drive for growth in the UK which has seen 21 new stores open over the past year, all of which are trading ahead of expectations.
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Reporting its first results since its flotation last year, HMV said that in the year to April 26, total group sales grew by 3.2 per cent to £1.7bn, with total like-for-like sales growth of 1.6 per cent. Operating profit increased by 12.1 per cent to £118.4m. Like-for-like sales grew by 1.9 per cent in the HMV business. The HMV brand also improved its share of the fast growing DVD market in all in all its trading regions. Like-for-likes grew by 0.9 per cent in the Waterstone’s book chain. The company said it had seen good progress in Waterstone’s, with a refit of flagship stores and “excellent” Christmas trading. HMV believes it is still under-represented in the UK, with HMV stores in each of the top 50 UK markets, but not in more than 50 per cent of the next 150 markets. The company said it has “high brand awareness and a valuable consumer franchise but no distribution to, effectively, some 20 per cent of UK shoppers,” creating a focus for expansion. Fifteen more stores are planned for this financial year. The last year has also seen more edge-of-town openings for the HMV brand, as well as the first HMV stores on railway concourses, at London Victoria and Manchester Piccadilly stations. HMV Europe grew total DVD sales grew by 83 per cent year-on-year. In the UK HMV established a market leading 25.8 per cent share of the DVD market, which it describes as an “outstanding feat” since HMV was not the market leader in VHS. DVD accounted for over 40 per cent of HMV UK Christmas sales, compared to 45 per cent for music. HMV has a 7 per cent market share in Japan, where it now operates 37 stores. HMV sees an opportunity to become a leader in what is a fragmented through store expansion. There was also “outstanding” growth in Australia. In North America, where HMV is primarily located in Canada, the company encountered “very difficult trading conditions.” Five USA stores have been closed leaving seven still trading. Chief Executive Alan Giles said: “These very good results reflect the progress that has been made by the group in delivering the strategy for growth set out at our IPO a year ago. “An excellent performance from the 21 new HMV stores opened in the UK drove total sales growth of over 10 per cent in our largest business, and we have seen significant profit improvements in nearly all areas of the Group. Although there is more to do, we are also very pleased with the progress made in the first year of the turnaround of Waterstone’s.” In the eight weeks to June 21 HMV said there had been a good start to its major businesses, with total group sales growth of 1.7 per cent, and 0.9 per cent like-for-like growth. The launch of the new Harry Potter book boosted Waterstone’s like-for-like sales by 3.4 per cent in a single day, with total like-for-likes up 7.2 per cent. Over the same period, HMV UK and Ireland total sales were up 7.4 per cent, including 1.6 per cent like-for-like growth. Giles said: “An encouraging start has been made to the new financial year in our UK businesses, following difficult trading conditions in the final quarter of last year. With some 20 new stores opening over the months ahead, mainly in HMV UK but also in HMV Japan and Waterstone’s, we continue to invest for future growth.”
