OUTLOOK HMV Group seen reporting robust H2

LONDON, May 09, 2008 (Thomson Financial via COMTEX) -- HMVMF | news | PowerRating | PR Charts -- HMV Group Plc, the music, DVD, games and books retailer, issues a second half trading statement Friday which is expected to show the group continuing to benefit from a buoyant UK computer games market.

For the second half to April 29 analysts at Deutsche Bank are forecasting an 8 percent increase in like-for-like sales at HMV UK & Ireland, with HMV International down 1.7 percent and Waterstone's up 2.0 percent.

They also expect HMV to say that full year pretax profit will come in towards the top end of the consensus range of expectations. Deutsche Bank is currently forecasting a profit before tax and exceptional items of 54 million pounds, up from the 48.1 million pounds made in the previous year.

"We see a strong [games] product pipeline sustaining double-digit industry growth in 2008 and thus have increasing confidence that HMV will meet or beat consensus expectations," they told clients.

Nick Bubb, analyst at Pali International, is forecasting a 10 percent rise in HMV UK's second half like-for-like sales, with Waterstone's up 3 percent. He is currently forecasting a full year pretax profit of 56 million pounds and would not be surprised if he has to increase this by a couple of million.

However, he cautions that comparative numbers are much tougher in HMV's new financial year, with the weather and the DVD market unlikely to be as helpful in the year to end-April 2009.

HMV last updated the market on Jan 17. when it emerged as one of the few high street winners over a tough Christmas.

For the 10 weeks to Jan 5 group like-for-like sales increased 7.9 percent. Within this like-for-like sales at HMV UK & Ireland increased 12.0 percent, with HMV International down 1.5 percent and Waterstone's up 3.3 percent.

The group also flagged that full year gross margins would be in line with previous guidance.

HMV's chief executive Simon Fox took up his post in September 2006 and in March 2007 announced a "radical" three-year plan to revitalise HMV's businesses and counteract a rapidly declining physical music market.

In the UK, the group is battling being squeezed by the supermarkets and online retailers, as well as the threat posed by the increasing popularity of music downloads. In March 2007 Fox predicted physical music sales in the UK would fall in value by 26 percent over the following three years.

To tackle this, he is focusing on three areas: driving cost savings of 40 million pounds by 2009/10, revitalising the core business, and generating new revenues from new channels.

He has built up the group's online business, focused more on games and enhanced the range of technology products. james.davey@thomsonreuters.com jdd/ejb

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