HMV whistles a happy tune

So said HMV chief executive Simon Fox at last week’s interims and it was a polite way of noting that Woolworths had gone bust and his stores stood to benefit as a result.

Up for grabs is about£400 million of entertainment sales once spoken for by Woolies – perhaps more if HMV’s rival Zavvi, hit by the collapse of Woolies’ EUK entertainment supply business, cannot cope with the crisis it finds itself in.

City opinion is supportive of Fox’s take on the implications of Woolworths’ failure, but some longer-term questions remain. While HMV may be one of the last men standing in entertainment retail, how will it fare as downloading and e-tail more generally grow?

In-store game-playing areas, the introduction of second-hand games and the muso’s traditional love of congregating with other enthusiasts should all help ensure that shops continue to play an important part in HMV’s future.

At the same time HMV’s online business, both at the eponymous music chain and bookseller Waterstone’s, has been growing – by 20 per cent and 50 per cent respectively in the first half. Through initiatives such as the exclusive launch of the Sony Reader it has shown determination to take its place at the e-commerce table.

Conditions are tough for HMV, as for other retailers. But so far, Fox’s improvement plan is delivering the goods.

Not so sterling

The only good thing about sterling’s drop is that nobody can go on about rip-off Britain any more, but its continued decline is another headache for stores. Retailers that typically buy in dollars have been able to bring prices down for consumers in recent years. But transformed money markets now threaten bought-in costs and therefore margins.

Many retailers are still well hedged for months to come but are having to consider the extent to which, if at all, shoppers will accept price rises. Big retailers with greater buying scale and pricing power will be best placed to cope.

Many smaller store groups don’t have the same flexibility or resilience to currency shifts. At the same time, they must confront a continued consumer slowdown.

It’s a pincer movement that is likely to put a severe squeeze on vulnerable retailers next year.

George MacDonald is deputy editor of Retail Week