HMV has today announced plans to appoint an administrator. The news follows the closure of Jessops, the camera retailer last week and electrical superstore Comet late last year. The news comes following a sharp dip in turnover for HMV; in December the company announced sales of 288.6 million in the six months to October 2012, from £333.7m in the same period in 2011. The announcement leaves 4,300 jobs at risk in the UK.
HMV’s problems have largely been attributed to their business model, which has become largely irrelevant in recent years with over 70% of music and film purchases now being made online.
HMV had attempted to continue to trade outside of insolvency protection but music labels and film companies were not willing to support HMV with the funding to do so, forcing them to file notice to appoint administrators. The music and film retailer had been struggling for over a year and had already had to sell off other areas of the business. The company has stated that it will not be accepting gift vouchers or issuing anymore.
It has been reported that the intention of the administrators will be to seek a purchaser for the business whilst continuing to trade in the meantime. The HMV brand name still retains some value for a potential purchaser but the business model would need to be drastically changed. One of HMV’s major downfalls is that the company failed to capitalise on the expansion of the digital sales market, with purely online retailers, such as Amazon, along with digital downloads, having taken much of HMV’s business in recent years.
HMV is the latest store in a series of recent High Street casualties, following the likes of JJB, Clinton Cards and Game into administration procedures.
Here at Farleys we have a specialist team of insolvency practitioners who regularly advise struggling companies in relation to the options which may be open to them. Our corporate insolvency solicitors deal with Company Voluntary Arrangements, Pre-Pack Administrations and Creditor’s Voluntary Liquidations on a daily basis. Our experience at present is that compulsory liquidations are on the increase. The best advice for when a business is starting to decline is to seek specialist advice at an early stage. This is essential in order to allow the door to remain open to the full range of options, which may enable the business to continue to trade as a going concern.
For free of charge initial advice in relation to a struggling business, do not hesitate to contact one of our corporate recovery solicitors.