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HMV wants to step into Best Buy’s shoes. Scary.

In the wake of the collapse of Best Buy’s plans for UK and European supremacy, could HMV emerge as an unlikely player in the ultra-tough electronics resale market?

KitGuru puts its shell-like to the ground and tries to decide if the rumbles it hears are thunder, horses or the sound of customers leaving the high street.

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From its heyday in the 70s and 80s, HMV has had it tough following the internet revolution. Companies like Napster have changed, forever, the way that the audio retail market works and the film industry, with Sky and pirate download sites, has followed suit.

Moving into the 21st century, HMV’s heyday has evolved into something of a mayday.

Back in June, things came to a head and HMV had to negotiate with its bankers Lloyds and RBS for a £220 million refinancing package.

This cash crisis comes in the wake of it selling parts of its business, like Waterstones. With the modern online economy, HMV has struggled to compete with its huge stores and the associated costs for staff, rates etc.

The crunch faced by Simon Fox (CEO) and his board has now been compounded by a lack of support from the insurance companies.

His master's voice or deafening silence, what is Simon Fox listening to as his share price tanks?

For a company the size of HMV, cashflow is crucial. One of the standard ways for major retails to control cashflow is to have massive lines of credit with suppliers and distributors. Right now, it looks like the the insurance companies won’t give many suppliers the credit lines HMV wants to push forward.

So what is Simon Fox’s solution?

Right now, HMV is looking to convert around 160 stores across to being HMV electronics specialist – focusing on the Dixons end of the market.

Which is the Best Buy end of the market.

You know. the huge American retailer that’s just confirmed it’s running away from the UK market. Fast.

Companies like HMV will do a big chunk of their annual business around Christmas. The cash flow from November through to the end of January, provides momentum for the whole group. Severe restrictions on supplier credit can mean the store won’t be holding enough of the right products at the right time. That impact can be felt throughout the rest of the year.

Will the streets be filled with more of these? Tough times ahead for HMV.

KitGuru says: It would be a real shame to lose HMV as a brand. Most of us grew up on the records and CDs purchased from this high street giant – and their ‘midnight launches’ for games, films and albums are legendary. That said, with the demise of Woolworth’s, it’s clear that no name is safe in this market. We genuinely wish Simon Fox and co luck. Tough time to be a high-overhead retailer without significant cash reserves.

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