HMV equity issue not on playlist

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LONDON (Global Markets) - British entertainment retailer HMV (HMV.L), grappling with waning demand in its core CD and DVD markets, said an equity issue was not on the agenda -- in the short term at least -- as it posted a further slump in sales.

"It is not on the table today, we do not have an equity story today," chief executive Simon Fox told reporters Friday when asked about analyst speculation of a rights issue early in 2012.

He said such a move would only be considered when HMV had demonstrated "a sharply improved business performance, and the initiatives we are putting in place work in a convincing way."

The 90-year-old group, famous for its Nipper the dog trademark, said sales at stores open more than a year plunged 15.1 percent in the 18 weeks to September 3, which spans its fiscal first quarter.

That compared with a like-for-like sales fall of 14.5 percent in the year to April 30 and was broadly in line with analysts' expectations.

Total retail sales in the first quarter, including the impact of 29 store closures, slumped 21.8 percent. Including the firm's HMV Live business, total sales fell 19.4 percent.

"Entertainment markets have changed rapidly and we've got to move really fast, we've got to change our business," said Fox.

HMV has issued four profit warnings this year as a downturn in consumer spending exacerbated the long-term challenges of intense competition from supermarkets and internet retailers, as well as the increasing popularity of digital downloading.

In June, the group secured its immediate future with a 220 million pounds ($354 million) refinancing deal with banks. It has also sold the Waterstone's book chain and its Canadian arm to cut debt.

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HMV has been shifting its emphasis from CDs and DVDs to the growth markets of entertainment-related technology products such as MP3 players, headphones, speaker docks and tablet computers, as well as live music and event ticketing.

It is spending 6 million pounds refitting 150 stores by early October to focus 25 percent of selling space on the new product areas.

It said like-for-like technology sales in its initial six "Fast Forward" stores have continued to more than double.

Extrapolating that uplift across 150 stores would deliver a 6-7 percent improvement in like-for-like sales from current run rates, said Fox.

The firm said HMV Live fared well during the summer festival season, with attendances up 23 percent on a like for like basis.

Fox said a strong product line-up at Christmas gave him some confidence, highlighting releases of all six Star Wars films on Blu-ray discs, and new albums from Coldplay and The X Factor artists.

HMV shares, which have lost 90 percent of their value over the last year, were unchanged at 6.4 pence at 1058 GMT, valuing the business at about 26 million pounds.

HMV made an underlying pretax profit of 28.9 million pounds in the year to April 30. However, analysts expect little or no profit in 2011-12 and, despite the refinancing, believe the firm, which employs about 4,500, faces an uncertain future.

Seymour Piece analyst Freddie George forecast a 2011-12 pretax profit of 2 million pounds. "We maintain our sell recommendation as we continue to believe that the business is a value trap and management will struggle to grow profitability."

Thursday, Home Retail's (HOME.L) Argos business reported an 8.6 percent plunge in second-quarter underlying sales, while Wednesday, Dixons Retail (DXNS.L), the UK's largest electricals retailer, posted a 10 percent fall in first-quarter UK like-for-like sales.

($1 = 0.622 pound)

(Editing by Rhys Jones, Sophie Walker and David Hulmes)