UPDATE 2-HMV enjoys record Christmas, eyes top-end '08 profit

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LONDON, Jan 17 (Reuters) - Britain's HMV Group HMV.L enjoyed its most successful Christmas ever and it expects pretax profit to be towards the top end of market expectations, it said on Thursday, sendings its shares soaring.

The retailer, which runs Waterstone’s bookstores and music shops under its own name, reported group like-for-like sales growth of 9.4 percent in the five weeks ended Jan. 5 -- its highest figure since it floated in 2002.

The group was boosted by demand for DVDs, games, cookery books and albums by Leona Lewis and Amy Winehouse. Chief Executive Simon Fox said its performance proved it had made the right decisions in repositioning the group.

Asked if he would describe HMV as a winner on the High Street over Christmas after so many other retailers struggled, he replied, “Yes, I think we would.”

Its shares opened up more than 17 percent, and were trading up 11.4 percent at 112.5 pence by 0905 GMT.

“Probably the best Christmas trading statement we’ll see this year,” analysts at Panmure said in a note. “The instore proposition has clearly paid off, but it remains to be seen whether the chain can build further on this strong LFL performance.”

HMV announced a three-year turnaround plan in March last year, introducing “interactive” HMV stores and promoting online sales aimed at tackling competition from supermarkets and Internet retailers.

In its first Christmas under the new plan, HMV UK & Ireland reported like-for-like growth of 14.1 percent, while Waterstone’s saw like-for-like growth of 4 percent.

“Less than a year into our transformation programme the initiatives we are undertaking to revitalise our business have helped to deliver a highly successful Christmas,” Fox said.

“Having stabilised the business, we will continue to focus on revitalising our store propositions as well as growing new channels to market and carefully managing margins and costs. The Group is, therefore, well positioned for the next phase of its turnaround.”


Many of Britain's largest retailers, including Marks & Spencer MKS.L and DSG International DSGI.L have said they endured tough trading over Christmas but Fox said they were just not seeing it.

It outperformed the market in music sales -- an industry that has been hit hard by Internet piracy and digital sales -- and he attributed this to the experience of his staff, in spotting and promoting good music.

“I think we’re the only people taking music seriously. We’ve had exceptional like-for-like, 14 percent in HMV, and we continue to enjoy strong momentum,” he told reporters on a conference call.

“I’m clearly aware of what others are reporting (but) right now we’re not seeing it, all I can say is we think we’re in good shape to withstand whatever comes our way.”

Most analysts welcomed the statement but warned that next year could still be tough as the retailer operates in such competitive markets.

Gross margins were maintained at HMV UK & Ireland, despite a higher mix of games, and they were up 30 basis points at Waterstone’s despite a highly competitive book market.

Pretax profit for the year ending April, 2008, is forecast to be 48 million pounds ($94.24 million), with a range from 43 million pounds to 53 million pounds, according to Reuters Estimates and HMV group. (Reporting by Kate Holton; Editing by Louise Ireland)


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