London store disposal is ‘good deal for HMV’

HMV sold the lease of 360 Oxford Street to US fashion giant Forever 21, as revealed by Retail-week.com last week.

Arden Partners analyst Nick Bubb said the sum, and HMV’s intention to redistribute a “good chunk” of the store’s £25m annual sales to its other shops in the West End, made it a “good deal for HMV”.

Singer analyst Matthew McEachran said: “This headline-grabbing disposal is extremely cash positive.”

On the back of the disposal, and Russian oligarch Alexander Mamut’s acquisition of a 3% stake in the retailer earlier this month, Bubb retained his buy stance.

“The rating is absurdly low,” he said. “The management strategy to reposition HMV into an entertainment superbrand may yet succeed.”

However, he said: “The big trading weeks are still to come and the release schedule is promising, but the sales trend is not HMV’s friend.”

McEachran said HMV could benefit from “numerous initiatives” deployed in the eponymous chain and stablemate bookseller Waterstone’s. He said HMV should also benefit from softer comparatives.

Although McEachran reduced his full-year pre-tax profit forecast by £1.5m to £69m, he said: “Coupled with the cost reduction plans, we envisage second-half earnings per share exceeding last year’s.”