HMV hits a high note

MUSIC to books group HMV today defied the High Street pessimists with news that it had a better-than-expected Christmas not only in its record and DVD stores but also at its Waterstone's bookshops chain.

Its overall 6.4% growth in like-for-like sales is much better than Woolworths did in the same sectors, and is expected to have outstripped WH Smith, which reports tomorrow.

Chief executive Alan Giles also unveiled a higher-than-expected first-half dividend and promised share buybacks 'when appropriate' that could be worth £50m a year.

He warned that UK consumer spending could slow as interest rate and fuel price rises bite but added that HMV would still hit its full-year targets.

CDs from U2 and Scissor Sisters, the Little Britain and I Robot DVDs, Michael Palin's Himalaya and Dan Brown's Da Vinci Code led the Christmas best-sellers.

Like-for-like sales grew 4.3% at HMV in the UK and Ireland in the five weeks to 8 January. Actual growth, including new stores, was 12%. Waterstone's, with actual growth of 8.7% and like-for-like growth of 7%, pleased analysts, who had thought early discounting on top-selling books might have indicated a slowdown.

{2} Giles said: 'Waterstone's excellent performance over Christmas illustrates that the application of the HMV approach to retailing has converted it into a reliable, market-leading business which is now embarking on a new phase of expansion.'

HMV's pre-tax profits for the 26 weeks to 23 October rose 23% to £13.3m. Earnings per share were up 28% at 2.3p and the interim dividend jumps to 1.7p from 1.4p.

The group added a further 14 HMV outlets and launched the Waterstone's superstore on London's Oxford Street during the half-year.

HMV makes 40% of its sales but only 15% of its operating profits in the first half, with Christmas crucial for a good result for the year.