Private equity turnaround investor Endless, which successfully turned around book chain The Works, is reported to be interested in a bid for HMV as Kantar warns to lose the retailer would cost physical video £300 million a year in sales.
Endless Partner Garry Wilson is said to have revealed the firm had already approached Deloitte, which is to be appointed administrator, to express an interest in the retailer.
Wilson said reportedly: “With retail administrations it is always possible to carve out a profitable business by leaving loss-making stores behind. We have had a great experience with The Works, which we bought out of administration in 2008 in the book sector. Despite the move to digital and downloads, demand for physical products remain strong.”
Other turnaround specialists such as Hilco, OpCapita, Rutland Partners, Kelso Place, Sun European Partners and Better Capital are said to have an eye on the retailer.
HMV CEO Trevor Moore told journalists he is confident the chain can be rescued: “We remain convinced that we can find a successful business outcome. We know that HMV is a well-loved brand, which has a high level of support amongst the public and we want to ensure that it remains on the high street.”
Research firm Kantar Worldpanel quantified the loss to the total entertainment market and Consumer Analyst Craig Armer told Cue Entertainment: “If HMV were to close completely, we expect the entertainment market to lose over £300 million – this is over 9% of the total entertainment market value. Some shoppers will simply move to other retailers but the value generated from browsing and buying on impulse will be lost.
“Of the remaining shoppers and spend, we predict that the big four grocers combined will pick up 32% of this spend and Amazon will claim 29%, inflating its share to 25.5% and making it the largest entertainment retailer by a significant distance. Tesco would be No. 2 with a 14.1% share of the market.”
Armer said that the high street without HMV would account for just 16% of entertainment spend, driven by a few key remaining chains such as the slimmed down Game chain, Argos and Blockbuster.
He said, “This would be a significant drop in share — this time last year high street retailers made up 31% of the entertainment market. Although Amazon is likely to gain the most, HMV shoppers prefer physical stores, meaning that any bricks ’n’ mortar chains are likely to acquire slightly more of this lost spend than expected.”
Armer said the DVD and Blu-ray market could stand to lose 12% of value with older titles expected to account for the bulk of losses since shoppers can still find new releases in grocers and online, and new release is not generated by impulse purchases to the same extent.
Music could see 10% of the market potentially being lost. The CD albums market in particular could lose up to 17% of its value.
Kantar claimed just 4% of the games market could be lost as a result of HMV’s closure because of HMV’s smaller share of the market.
Image: HMV Corporate website