5 Apr 2011

HMV profits warning amid high street turmoil

Washington Correspondent

High petrol, cotton and wheat prices are being blamed for the turbulence on Britain’s high streets as music retailer HMV issues its third profits warning of 2011. Siobhan Kennedy looks at the numbers.

As HMV issues another profit warning, turmoil rages on the high street

HMV has joined the chorus of bad news coming from Britain’s high streets.

The troubled music, video and book chain, which also owns bookseller Waterstone’s, warned the markets that its profits would be below forecasts – the third time this year it has been forced into this humiliating measure.

HMV may have to consider disposing of Waterstone’s and HMV Canada. Billionaire Russian businessman Alexander Marmut, who owns 6.1 per cent of HMV, has been linked with a bid for Waterstone’s along with founder Tim Waterstone.

In the past two weeks the flow of bad news on the high street has become a torrent.

Supermarket Sainsbury’s reported falling sales; H&M missed its sales target; the owner of Currys and PC World issued its second profits warning; and Oddbins went into administration on Monday.

Clothing retailer Next offered a rare shaft of light – but its boss has warned of a tougher year ahead.

Cold wind on the High Street

Up as the cost of cotton has more than doubled in a year

Up 68 per cent, pushing up the price of bread

Up 11 per cent as global oil prices have surged

Up nearly 3 per cent in three months
Up 2.5 per cent, combined with fears over higher interest rates and spending cuts

Post-Christmas blues
Everything was fine at Christmas. So what has happened in the last three months?

Pressure is coming from all fronts. Clothing prices, particularly for women, have jumped as cotton prices have more than doubled in the past year.

The price of wheat is up, which means bread is more expensive – and so also are tinned food, meat and cereals.

Petrol prices have soared over the last 12 months as global oil prices have leapt. That has also meant a jump in gas and electricity bills.

Topping all of that is a rise in VAT, plus fears over interest rate rises and austerity cuts to come.

No wonder consumer confidence is at a record low – and household debt is still sky-high.

On Wednesday, the retail giant Marks & Spencer is expected to add to the gloom when it posts its fourth quarter trading update. Analysts are forecasting a decline in like-for-like sales in the 13 weeks to 2 April.

M&S is expected to reveal a particularly weak performance in its general merchandise sales, including clothing, though analysts predict a rise in food sales.