19 January 2011 | Angeline Albert
A number of suppliers to high-street music retailer HMV have been refused credit insurance for future stock.
by credit insurers follows a profit warning issued by HMV in December and means the suppliers
concerned will sell to HMV at their own risk and lose
money if the entertainment group goes bust.
While HMV did not say how many suppliers have been refused
credit, the BBC’s Radio 4Today programme
has today reported that two have been told they won't get insurance cover for
selling to the group.
Gennaro Castaldo, a spokesman for HMV, said: “In light of recent
comment on credit insurance cover, HMV Group wishes to clarify that, following
the peak trading period, credit insurers are reviewing the level of cover they
provide on the group. While this has resulted in the reduction in the
availability of credit insurance to certain of the company's suppliers, our
business remains a core channel to market for them. We continue to maintain
excellent relations with our suppliers and have had no difficulty in obtaining
The CD and DVD retailer has been facing tough competition from online
sites where music and films can be downloaded.
An interim statement by HMV for the 10 weeks ending 1 January,
which followed last month’s profit warning, said: “The challenging
entertainment markets, combined with the severe weather over our peak trading
period, have had a negative impact on our trading year to date. Given the
difficult trading conditions over Christmas and the likely outturn for the
year, the board now expects that compliance with the April covenant test under
the group's bank facility will be tight and is taking further mitigating
actions during the next four months to address this.”
HMV said it is taking “aggressive action” to tightly
manage its cost base. The group expects to close 60 UK stores over the next
year. It has also identified a further £10 million a year of cost savings from
across the group.