Ailing retailer HMV will this week update the market on its battle for survival ahead of a make-or-break Christmas, while Chancellor George Osborne’s deficit reduction plans will be tested.
HMV will reveal on Monday whether its new technology stores have helped put it on the road to recovery ahead of the beleaguered group’s key Christmas trading period.
The retailer is fighting for survival amid dire demand for CDs and DVDs but has pinned its survival hopes on a new store format that dedicates a quarter of its space to selling iPods and tablet computers.
The group, which was recently forced to sell its Waterstone’s book chain to stave off collapse, is expected to report widening losses in the six months to the end of October amid like-for-like sales declines of at least 10 per cent.
HMV’s last update said the first six ‘Fast Forward’ stores recorded a doubling in like-for-like sales in the 18 weeks to September 3, compared to a 15.1 per cent decline in like-for-like sales across the HMV Retail network.
Its enhanced offer was extended to 150 of its 250 stores by the end of October but the tactic is seen as dicey because other technology stores, such as Comet and Best Buy, have struggled amid the squeeze in consumer spending.
Independent retail analyst Nick Bubb said: “They have got to somehow make a success of this new format, otherwise they are sunk.
“Technology will make or break HMV this Christmas. HMV is already the number one seller of headphones, so it could just work.”
He expects the group to report a 19% increase in first-half pre-tax losses to £38 million - a period that is normally loss-making for the group - and warned it is now in danger of failing to break even in the full-year.
HMV has announced the closure up to 60 stores in a bid to make £10 million of cost savings and investors will be on the look-out for any further plans to scale back its retail estate.
The sale of Waterstone’s and HMV Canada raised the group £55 million and ensured a £220 million refinancing deal with its lending banks.
With the UK’s economy on the brink of recession, Chancellor George Osborne’s deficit reduction targets are expected to come under further strain on Wednesday.
The financial watchdog the Office for Budget Responsibility (OBR) last month raised the Government’s full-year borrowing target from £122 billion to £127 billion.
Although this is still £10 billion less than the previous year, the OBR moved the goalposts as it downgraded its predictions for UK economic growth.
The faltering state of the economy means the Government’s tax revenues are likely to be hit at the same time as it is saddled with a bigger bill for benefits payments.
In the financial year to date, the Government’s deficit has been broadly on course to hit its previous £122 billion target.
The most recent figures, for October, saw public sector borrowing, excluding financial interventions such as bank bail-outs, fall to £6.5 billion, which was £1.2 billion lower than the previous year and left borrowing in the year since April at £68.3 billion.
Figures released for November on Wednesday are expected to show that the deficit is still falling - but at a slightly slower rate than previously.
Philip Shaw, an economist at Investec, predicts the figure will come in at £19.8 billion, modestly below the £20.5 billion in the previous year.
He said: “Overall, it should be noted that although the Government’s plan to reduce the deficit should ultimately be successful, it is very vulnerable to the risk that the economy undergoes a more severe downturn than either the OBR or we are expecting.”
Prime Minister David Cameron recently admitted that controlling Britain’s debt was “proving harder than anyone envisaged”.
High petrol prices forcing people from their cars onto public transport are expected to have boosted sales at transport group National Express.
The group, which runs the c2c and East Anglia rail services between London and Essex as well as bus and coach services, is set to reveal on Tuesday that revenues in the final quarter of 2011 continued to benefit from the resilience of public transport and from higher train fares.
Train operators increased fares by an average of 6.2 per cent in January but passenger numbers are expected to have held firm as a result of an even greater rise in the cost of filling up a car, with commuter routes being boosted on weekends as families use the rail network for sightseeing.
Analysts will be looking out for whether the rail business has continued its recent strong growth or if rising unemployment levels have begun to hit demand from commuters.
Rising petrol prices are also expected to have boosted its bus business, which operates more than 1,600 vehicles and employs 5,800 people in the West Midlands and Dundee.
Earlier this year, the group said it planned to add 120 new buses to its West Midlands fleet and draw in more customers with a new marketing campaign to highlight the costs of running a car versus the cost of bus travel. It claims that on some major routes, leaving a car at home and taking the bus could save a customer £2,500 a year.
The company has also been adding routes to its coach businesses, which serves around 1,000 destinations and employs 1,600 people, and draw in customers with new special offer fares following the successful launch of its £9 go anywhere deal over the summer.
The Government last month removed a concession that helped over-60s travel on coaches for half-price and was used for about three million National Express journeys a year. But the group has countered this by launching senior and disabled persons’ coach cards and putting on more promotions.
National Express, which also operates in Morocco, Spain and the US, is forecast to report a 12 per cent rise in pre-tax profits to £180.5 million in the year to December 31 on revenues up 3 per cent to £2.2 billion.