HMV, struggling to find any Christmas cheer

HMV has been in decline for some time, fighting a rearguard action against the tide of technology that is moving away from its core products CD's, DVD's, a once member of the FTSE250 now languishes with the smaller company minnows, its share price at around 2.5p a mere fraction of the glory days of 225p+. The HMV story has been one of a classic value trap all the way down to its current sorry state and no matter what the company has attempted to do to put things right, another bolt to its chances of surviving always seems to be just around the corner.

So, today's news of further decline in sales and a probable breach of its banking agreement in the new year offset the news a few days ago that its suppliers were backing it over the Christmas period with financial support, the shares are currently down 35% so far on the day.

...conditions meant the business was facing "material uncertainties" and warned of a "probable covenant breach at the end of January 2013".

But, the chain added that it was in "constructive discussions" with its banks and was keeping them fully informed on current trading.

First-half sales at HMV slipped 13.5pc to £288.6m, while like-for-like sales fell 10.2pc, with the chain saying it had been affected by a "poor release schedule" across the summer months as suppliers avoided events such as the Diamond Jubilee.  

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9741691/HMV-faces-probable-banking-agreement-breach.html

Losses of £37.3million were actually down from £48.1million for the same period from the previous year, but apparently Christmas is off to a slower than expected start this year. HMV has always made most of its money in the second half, especially over the Christmas period, can they afford for it to be a bad one? Much will depend on the banks that back them.

Unlike Dixons and Home retail Group (Argos), HMV has not been able as yet to turn things around and is now a pure gamble play on any long term recovery. It's the type of share which at a price of 2.5p you would simply buy and probably forget, but only with money that you can afford to lose and assuming you think that there is still the potential there for recovery. If it goes under and there is a chance of that, then you gambled and lost. If it recovers then there is the potential of a Dixons type gains from here. The problem is that its debt makes HMV the Greece of the UK High Street and one wonders how it can ever get back to making enough profit to repay what it owes. As the last man standing in entertainment retailing on the UK High Street, the last thing HMV needs is another bad Christmas.