HMV profit up on computer game sales

By Mark Potter

LONDON (Reuters) - HMV (HMV.L) met forecasts with a 25 percent rise in annual profit, boosted by computer games where it said it was continuing to take market share, but its stock fell on mounting gloom over consumer spending.

Shares in the music and bookstores company, which have outperformed the general retail index .FTASX5370 by 55 percent this year largely due to its exposure to fast-selling games consoles such as Nintendo's (7974.OS) Wii and related products, fell as much as 7.5 percent in early Tuesday trading.

Kaupthing analysts said some investors may have been hoping for profit upgrades for the new financial year, while Seymour Pierce analysts advised taking profits.

HMV, which owns bookseller Waterstone's as well as music shops under its own name, said profit before tax and one-off items was 56.6 million pounds in the year ended April 26, boosted by a 59 percent surge in sales of computer games in its UK and Irish stores.

The firm said in May that underlying profit would be towards the top end of analysts' expectations, which at that point ranged from 48 million to 58 million pounds.

A poll of 16 analysts by Reuters Estimates gave an average forecast of 56.7 million pounds.

"Whilst we are mindful of the challenging economic outlook, the current financial year has started in line with our expectations," HMV Chief Executive Simon Fox said.

Store groups are worried that indebted shoppers will cut back on spending amid rising fuel, food and mortgage costs and sliding house prices.