HMV cuts losses as rivals fall victim to slump

HMV Group expects its Waterstone's book chain to get a late pre-Christmas shopping boost following the collapse of Borders UK, as the failed bookseller's closing-down sale comes to an end. But the owner of the HMV entertainment retailer will get a much bigger uplift next year if the Borders chain of 45 stores, with annual sales of more than £200m, disappears as expected.

Its comments on Borders, which collapsed into administration last month, came as HMV Group posted a reduced pre-tax loss of £24.9m for the half-year to 24 October, compared with £27.5m last year. Total sales at the group rose by 5.6 per cent to £797m.

Simon Fox, the chief executive of HMV Group, said: "The UK book market became progressively tougher during our first half and has remained difficult, as evidenced by the recent administration of Borders. In the medium and long term, the potential withdrawal of a competitor may, of course, benefit Waterstone's." He added it was considering buying "one or two" Borders stores.

Waterstone's like-for-like sales tumbled by 5.1 per cent in the first half. In recent weeks, Waterstone's has been hit by the closing-down sale at Borders, which is currently offering many products at a 60 per cent discount.

Mr Fox said: "You do see a lot of cheap stock flooding into the market, which clearly diverts business from us into that heavily discounted closing-down frenzy." HMV has also benefited from the disappearance of Woolworths and Zavvi at the start of this year. In areas where stores overlapped, Mr Fox said that HMV had enjoyed "significant market-share gains" in both music and video.

The group is currently mulling a take-over of its joint venture partner Mama, the live music group, but did not comment further yesterday. On Thursday, HMV bought a 8.2 per cent stake in Mama, which runs venues including London's renamed HMV Apollo.

Over the half year, HMV UK & Ireland recorded underlying sales up by 1.6 per cent, which were boosted by increasing its revenues on technology and related entertainment products.

The retailer said it had captured share in a "weak" computer games market. It has also rolled out the mobile phone operator Orange's concessions to 20 stores and more are expected in the second half. Total sales at HMV UK & Ireland rose by 12.8 per cent to £470.7m, boosted by 32 stores acquired from Zavvi.

HMV expects plenty of Christmas cheer from music sales generated by current and former X Factor contestants, as well as Susan Boyle, the star of Britain's Got Talent. Mr Fox said: "It's a very good Christmas for music, led by the whole X Factor effect and Susan Boyle's quite remarkable sales performance."

However, underlying sales fell by 11.1 per cent at HMV International, which suffered from tough trading in Canada, Hong Kong and Singapore, along with a weak release schedule of computer games.