June 28, 2007

By By Juliana Koranteng, London

British retail giant HMV Group admitted today it had suffered a "difficult" financial year.

Pre-tax profits for the music-and-books specialist retailer slumped 73% to ?21.6 million ($43 million) in the financial year ending April 28, from ?80.2 million ($160 million) for the same period in the previous year.

And net debt soared to ?130.6 million ($261 million) from ?15.6 million ($31 million).

However, sales jumped 3.8% during the period to ?1.89 billion ($3.77 billion).

In a statement issued to the London Stock Exchange, HMV attributed the slump to the still-decreasing CD sales, and its market share having been snatched by supermarkets and online rivals.

At the regional levels, HMV reported a 0.5% decline in revenue to ?932.2 million ($1.86 billion) in U.K. and Ireland; a 13.7% fall to ?237.6 million ($474 million) in Asia; plus a 3.8% decrease to ?187.2 million ($373.7 million) at HMV Canada.

Its Waterstone's bookseller reported a 28.4% rise in sales to ?537.5 million ($1.073 billion).

Going forward, CEO Simon Fox said the group will implement cost cuts by delivering products tailored for specific locations.

Additionally, the company said it plans to expand its inventory of digital audio products, including MP3 and MP4 players and DAB (digital audio broadcast) radio sets to represent 13% of total sales by 2010. The U.K. stores will also include sections devoted to 3, the 3G (third-generation) mobile phone operator and seller of music-enabled mobile phones.

Moreover, HMV Group plans to enhance the number of alternative delivery platforms for its music inventory, such as its U.K. Web site www.hmv.co.uk.

"By 2010, we expect hmv.co.uk to become 20% of HMV U.K. sales... to provide customers with a unique choice of physical or downloadable product from a single site," Fox added.

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