Entertainment group HMV is to extend the product offer at its eponymous music business and has set out a turnaround strategy for books chain Waterstone’s.

The retailer is updating investors today on its plans, as implementation of its original transformation plan, launched in March 2007, comes to an end.

The retailer intends to increase sales of new product categories at its HMV business. It aims to take technology and entertainment-inspired fashion  from 9% of sales at present to 21% in 2012/13.

Following its acquisition of live music venue business Mama, HMV expects to benefit from changes in the market. The retailer said that “the value chain for music is moving into live” and the total live music market is likely to be a third bigger than recorded music by 2012. HMV will add new venues to its existing chain at the rate of two or three a year.

Books chain Waterstone’s is to be revitalised to “reflect its specialist appeal”. The range will be repositioned to “enhance availability and rebalance promotions”, branches will be empowered to stage local promotions and the proportion of non-book sales will be increased from 6% to 10% by 2013. Realising the benefits from Waterstone’s distribution hub will also be a priority, and a new e-books store will debut in May.

The changes are expected to improve Waterstone’s net margins to between 2% and 3% in the short term and up to 4% in the medium term.

HMV Group chief executive Simon Fox said: “Having rebuilt profitability over the last three years we have a clear strategy to continue the transformation of the group and to ensure it has a vibrant and sustainable future, even though the markets in which we operate continue to change.

“We will continue to evolve HMV as a brand able to offer our customers a wide range of entertainment products and related experiences to be enjoyed home, live and on the move.

“We have a clear plan to quickly revitalise the performance of Waterstone’s, and to maximise its position as the high street’s last remaining book specialist.”

The retailer said its plans are “underpinned by a flexible cost base” and further savings of £25m have been targeted by 2012/13. Waterstone’s hub is expected to bring savings of between £4m and £5m in 2010/11.

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