Music and books retailer HMV Group today revealed a raft of cost-cutting measures - including store closures and redundancies - as it battles with tumbling sales.
The group will close 60 stores over the next 12 months after it reported a 13.6% slump in HMV's like-for-like sales in UK and Ireland in the five weeks to January 1 and revealed it was struggling to meet the terms of a bank loan.
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Shares plummeted 24% after the company, which has some 600 HMV and Waterstone's stores in the UK, warned profits for the year to April would be near the bottom of the current range of City forecasts.
David Jeary, a retail analyst at Investec Securities, said the company failed to improve UK sales despite easier comparatives with a year ago.
He added: "While adverse weather undoubtedly was unhelpful to the business in the UK, the core HMV division remains under considerable stress as a format and this must raise questions over its long-term future."
As well as the disruption caused by snow and ice before Christmas, HMV said its core entertainment markets remained weak and underlined the urgency with which it needed to carry out its turnaround strategy, which focuses on broadening the product mix.
Faced with competition from supermarkets in its core CD and DVD markets, the group has branched into new areas such as technology sales, recently including Apple's iPad, as well as entertainment-related products. It has also pushed into fashion, mobile phones and Blu-ray discs, while its swoop for festivals and gig venue owner MAMA Group cemented its position in the fast-growing live market.
But it also pledged aggressive action on costs and said it would close 60 stores across its UK businesses over the next 12 months and seek a further 10 million a year of cost savings. Some closures will include lapsed leases and stores in locations where there is more than one outlet.
The group confirmed there would be redundancies, but the number of job losses had not been determined. A number of staff will be offered positions in other stores.
HMV admitted it is facing a battle to meet a test on its bank covenants in April, which is linked to its rental bill.
But a spokeswoman for the group said HMV was still confident over its long-term future and believed the cost-cutting measures would help it meet the bank covenant test.
She said the turnaround strategy was working, with strong sales in its live music division and in technology products, which were up 20% in the period.
Waterstone's also showed improved sales, with a 0.4% drop on a like-for-like basis in the five weeks to January 1.
HMV had hoped that a line-up including Take That and Cheryl Cole albums, DVD releases such as Toy Story 3 and Shrek 4, and new games Call Of Duty: Black Ops and FIFA 11 would boost trading over Christmas after a 16.1% drop in like-for-like sales in the six months to the end
But chief executive Simon Fox said the anticipated improvement in sales failed to materialise due to the weather and challenging markets.
He added: "Whilst HMV has had a challenging year to date, it remains a profitable and cash-generative business and a powerful entertainment brand.
"The pace of change in the markets in which we operate underlines the urgency with which we must continue to transform this business."
HMV said profits for the year to April were likely to be around the lower end of current market expectations of between 46 million and 60 million.
Despite HMV reporting a weak entertainment market, a survey by the British Video Association (BVA), showed consumers spent 2.6 billion last year on video entertainment - including DVD, Blu-ray and digital services. The BVA said Avatar was the most popular title sold during the year, followed closely by Toy Story 3.