LONDON: HMV, the biggest seller of music and DVDs in Britain, on Tuesday reduced its profit forecast for the second time in three months as it lost more business to Internet retailers. Its shares fell as much as 17 percent, a record drop.
The company said in a statement that profit for this year would be below a range of analysts estimates.
Later Tuesday, the finance director, Neil Bright, said that he expected analysts to cut estimates for fiscal 2007 pretax profit to about 50 million, or $96.5 million, from 61 million.
HMV will close up to 30 Waterstone s bookshops and cut an unspecified number of jobs at its headquarters, Simon Fox, the chief executive, said.
HMV s sales and profitability have been declining for more than a year as supermarkets and Web retailers won customers with cheaper books and music, obliging it to cut prices. Fox said he planned to prune 40 million from annual costs over the next three years as HMV reduces prices further to compete with music and movie downloads from Amazon and Apple.
"The suspicion is that this will be a case of rearranging the deck chairs on the Titanic," said Philip Dorgan, an analyst at Panmure Gordon.
"There are some good ideas in the review. Let s hope that they allow a reverse in a seemingly irreversible structural profit decline."
Revenue at stores open at least a year fell 3 percent in the nine weeks ended March 10, HMV said.
Same-store sales in Britain and Ireland gained 1 percent, while revenue at Waterstone s fell 6.1 percent. The company has about 330 Waterstone s stores and 235 HMV stores, the first of which opened on Oxford Street in London in 1921.
Shares of HMV tumbled as much as 25.25 pence to 127.5 pence in London, closing at 128.
5 pence.
In January, HMV announced a loss for the fiscal first half that was the biggest since its initial public offering in 2002.
One-time costs for restructuring will be 29 million this fiscal year, including 12 million relating to the acquisition last year of the Ottakar s bookstore chain, and 19 million in fiscal 2008, the company said Tuesday.
The company, which takes its name from its iconic "His Master s Voice" dog and gramophone trademark, said it plans to double spending on Internet advertising to increase the share of Waterstone s sales coming from the Web to about 9 percent in three years.
HMV music outlets will start selling a new range of portable players from Apple and Sony. The retailer said it also plans a new store format, without giving more details, and a networking Web site for music enthusiasts.
A "tiny" number of HMV stores may close, Fox said.
"Waterstone s and HMV are great brands, but have not adapted quickly enough to the way customers are now buying and consuming media," Fox, who became chief executive in September, said on a conference call.
Fox said he may sell the company s Japanese unit.
An HMV test store in Yokohama, Japan, opened Monday that includes about 30 to 40 music downloading terminals. Fox said he expects to announce plans for a British version this month that will offer "a totally new interactive experience.
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