HMV, parent company of Waterstone’s, announced the financial results of the year ending April 28, 2007. Total sales of merchandise increased 3.8 percent, inclusive of a 3.5% fall in like for like sales. Like for like sales up 3.8%, including an 8.8% increase in HMV UK & Ireland. Chief Executive Simon Fox commented, “The turnaround plan we announced in March is progressing well and we are on track. The benefits of our actions are beginning to come through and are reflected in the good start we have made to our new financial year.”
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The news is surprising, even a slap in the face to hear, but wholly unexpected. The Times reports that HMV boss Simon Fox has warned investors that the seeming cash cow known as HARRY POTTER AND THE DEATHLY HALLOWS is really far, far from that. Even though Waterstone’s had already sold nearly as many by preorder as were sold in total of the sixth Harry Potter book, because Fox said it was vitally important for the bookstore chain to offer the book at a competitive price – and so Harry 7 will be on sale for 8.99 pounds, roughly half the cover price – it would be “hard to make money”. Fox added that “if we try to be anything other than half price we are setting the Waterstone’s brand off as high price and that’s something we are trying to change.”
Fox’s comments reflect the fears of Kate Swann, the chief executive of WH Smith, and Philip Downer, the retail director of Borders. “Harry Potter will help sales but looking at the current offers we are not expecting it to help profits,” said Swann, while Downer added that “[July 21] will be a terrific evening of parties and events but we don’t expect to make any money from Harry Potter. The book will be available more cheaply from the supermarkets who treat it as a loss leader.” As the high street prepares for a Harry Potter price war with the supermarkets and online stores such as Amazon, which is already offering the book for 8.99 pounds. Asda and Tesco will deliver the Bloomsbury publication for 12p less, plus postage and packing. The retailers admit that the preorder price may fall to a 55 per cent discount closer to the publication date.
As part of HMV‘s latest financial statement showing that its year to April 28 2007 profit before tax and exceptional costs will be in line with market expectations, AFX reports that Waterstone’s like-for-like sales for the 16-week period fell 7.3 pct — again worse than the nine weeks figure of down 6.1 pct. The markets in which the group operates have continued to be extremely tough,’ said HMV chief executive Simon Fox, who took up his post last September. ‘Our businesses are now planning on the basis of continuing market change, and I am confident that the initiatives we are putting in place to reduce our costs, revitalise our core business and grow our revenues are being pursued at pace and will lead to a turnaround of the group’s performance.’
To start the turnaround for Waterstone’s, new children’s book and stationery departments are now being rolled out in its shops. In HMV Canada, the e-commerce website has been relaunched and games are now being sold in 77 stores. Fox said a good start has also been made to the group’s cost-saving programme, including the disposal in the calendar year to date of eight Waterstone’s stores.
Today is not looking to be a very good day for the UK’s most prominent bookstore chain. That’s because the company’s parent owner, HMV Group, reported a decline in like-for-like sales over Christmas and a loss for the past six months, calling trading “difficult,” according to the BBC. Like-for-like sales – which ignore new store openings – fell 0.8% in the five weeks to 6 January, though price cuts helped raise music store sales by 0.7%. Even worse, like-for-like sales at Waterstone’s fell 2% over the festive period.
The bad news may explain HMV’s second announcement, that its UK and Ireland managing director, Steve Knott, is stepping down at the end of the month after 16 years at the company. “We both agreed that now is the right time for him to move on and to bring fresh blood and fresh thinking into the group,” said chief executive Simon Fox, who will stand in for Knott until a new UK boss is found.