HMV disappointed the City last week with worse-than-expected interim results and cautious comments about the crucial Christmas trading period after snow hit sales.

The retailer, which owns bookseller Waterstone’s as well as eponymous entertainment stores, suffered widened pre-tax losses in the 26 weeks to October 23 to £41.3m from £24.9m.

Conditions remain tough. HMV reported: “Despite more encouraging trading at the beginning of the second half, the start to the Christmas trading period has been undermined by the severe weather of the last two weeks, which has significantly affected consumer footfall and consequently makes trading patterns hard to determine.”

HMV chief executive Simon Fox acknowledged the retailer had a “very tough” start to the year, but said it “was not all together unexpected”. He blamed a declining games market, which was “particularly tough”.

Altium Securities analyst Philip Dorgan labelled the results “very poor”. He said: “We doubt the Live [music venues] division will hit its ambitious targets. Overall, we believe profits are set to fall sharply.”

Seymour Pierce analyst Freddie George said the update was “disappointing” and highlighted concerns over a drop in current trade as well as HMV Live’s smaller-than-expected profit of £1.5m.

HMV recorded total group sales down 6% to £749.5m and like-for-likes slid 11.5%. At the UK and Republic of Ireland business total sales slumped 15.3% and like-for-likes plummeted 16.1%.

Fox said the HMV chain would now step up the realignment of its product mix, with a renewed focus on technology, which performed well in the period and now accounts for 12 % of sales.

HMV hopes to increase that figure to 21% within three years. “It’s clear the entertainment markets are difficult. We need to replace declining categories with new categories,” said Fox. He said the performance of HMV’s fashion offering The Studio was “so far encouraging”.

HMV will pass the VAT rise on to customers in a “phased” manner, Fox said. Waterstone’s total sales slipped 2.4% in the period, when like-for-likes fell 3.2%.

The retailer said “good progress” had been made on Waterstone’s turnaround, including refocusing its range and localised offers and driving sales of related product.

The Live opened the HMV Institute, Birmingham, and will open the Ritz in Manchester in the second half.

HMV appears in this week’s big story.

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