Retail group Woolworths took a £34 million hit yesterday after agreeing the sale of its loss-making music and video chain MVC.
The one-off loss on the sale of the 76-store business - for £5.5 million to corporate finance specialist Argyll Partners - will enable Woolies to focus on the battle to protect its high street stores from the retail downturn.
Woolies put the business up for sale in March after deciding that the investment required to reposition MVC would be "substantial".
The division, which sells CDs, DVDs, video games and digital music downloads, was founded in November 1991 as a joint venture between Kingfisher, which formerly owned Woolies, and a group of ex-Our Price directors. The business appeared to be on an improved trend in March, when Woolies said losses narrowed " substantially" due to better margins and tighter cost controls.
At the same time, the company said it would reduce the estate by closing the 14 worst-performing stores, although by yesterday it had offloaded five sites.
It is believed that Stockport-based independent chain Music Zone was close to agreeing the terms of a takeover of MVC in June, but the negotiations failed.
Argyll, which is focused on the retail and consumer products sector, said it looked forward "to working with the team at MVC".
The exceptional loss of £34 million booked on the MVC deal includes trading losses and the impact of store closures.
However, Woolies expects to benefit from working capital reductions of up to £10 million, as MVC used Entertainment UK, a wholesale business it owns, as a supplier.
Woolies has enjoyed a revival under chief executive Trevor Bish-Jones, lifting 2004 profits by five per cent to £73.1 million, although this has since been offset by the disappointing sales performance so far this year.
Mr Bish-Jones said: "The disposal of MVC removes a loss making business from the group and allows us to be solely focused on our retail business in Woolworths."