UK retailer HMV said today that its underlying profit had fallen by 21% over the past year as the music, video and bookseller suffered amid intense competition from the Internet and major supermarkets.
HMV, which is trying to combat rising competition via its acquisition of bookseller Ottakar's, said trading in the first few weeks of its new financial year remains difficult.
The company hopes that a series of new price cut initiatives and enhanced online offering will help improve profitability. It also intends to launch games downloads to mobile phones and film downloads to consumers' personal computers.
'Clearly it was a difficult year,' HMV's CEO Alan Giles said. 'Of course the supermarket and internet retailers are skilled, aggressive able competition and they are not going to relax their efforts in relation to these markets,' he added.
Giles, who plans to retire at the end of the year after almost nine years with the company, said HMV was rolling out a simpler nationwide series of lower prices. The moves follows a successful three-month trial at six stores in Wales, he said.
Giles said this strategy did not imply HMV was trying to mirror the price-cutting approach of such major retailers and online competitors given the company was a specialist retailer offering wider ranges. However, he said the company needed to cut prices on DVDs, CDs and books because consumers remain so focused on value.
HMV said pre-tax profit before exceptional items in the 52 weeks to April 29 was £98.2m sterling, compared with £123.8m a year ago. Turnover during the same period fell 2% to £1.83 billion. The company added that like-for-like sales in the nine weeks ended July 1 fell 10.1%.
Giles said the decline reflected 'extremely weak music and entertainment markets' as new video and music suppliers postponed major releases during the football World Cup tournament.
HMV, which runs Waterstone's bookstores, announced on May 31 it was buying rival Ottakar's for £62.8m. The deal was completed this week.
HMV has fended off two recent bid approaches from Permira as well as an attempt to buy Waterstone's by founder Tim Waterstone.
