Page last updated at 19:02 GMT, Wednesday, 14 January 2009

HMV to snap up some Zavvi stores

HMV store
The HMV brand will feature at music venues in future

Entertainment retailer HMV has said it is to buy 14 stores from troubled chain Zavvi, funded by selling new shares.

Proceeds will also be used to fund a move into the live music market, taking a joint stake in a firm running 11 venues including Hammersmith Apollo.

The 5,100 capacity venue will become the HMV Apollo in a naming rights deal.

HMV also said that sales in the five weeks to 3 January - which includes the Christmas period - were up by 2.9%, or by 0.5% not including new stores.

Top-selling DVDs Mamma Mia and The Dark Knight, as well as albums from Take That, Leona Lewis, and the Kings of Leon boosted sales.

ZAVVI STORES BOUGHT BY HMV
Bournemouth Castlepoint
Crewe
Dundalk
Dundrum
Glasgow Fort
Glasgow Silverburn
Liffey Valley
Limerick
Newbridge
Peterborough
Plymouth (Drake Circus)
Salisbury
Southend
Stockton-on-Tees

However, its Waterstone's book chain saw total sales down 0.9% in the same period.

Rebranding

The Zavvi stores it is buying are all profitable, HMV said, and are primarily in locations where it does not currently have a store.

Zavvi's administrators said 269 jobs would be saved by the deal.

HMV expects the purchase to cost about £2m - including fitting out and rebranding the stores, nine of which are in the UK and five in the Irish Republic.

Music, games and DVD chain Zavvi suffered after the collapse of its main supplier - Woolworths' unit Entertainment UK (EUK) - which went into administration in late November.

Since then, Zavvi has had difficulties in sourcing stock and has been forced to enter new trading arrangements.

By extending the brand into the growing live music and entertainment market, our customers will be able as never before to access and experience music in all of its forms via HMV
Simon Fox
Chief executive, HMV

On Wednesday, it announced it was closing a further 18 stores with the loss of 353 jobs.

The remaining 74 stores throughout the UK will remain open and the administrator is still hoping to sell the business as a going concern.

Ticket sales

As part of the live music deal, HMV will form a new business with MAMA, the firm that currently deals with the ownership and operation of the venues, which also include The Forum in London's Kentish Town, the Birmingham Institute and Aberdeen's Moshulu.

In the year to 31 July 2008, the 11 venues attracted about two million visits, and had combined revenues of £20.25m, with operating profits of £2.24m.

HMV is also setting up a division to sell tickets for events at these and other venues.

Chief executive Simon Fox said the deal was "far more" than a rebranding exercise of some of the venues.

"Music is very much part of our DNA, and by extending the HMV brand into the growing live music and entertainment market, our customers will be able as never before to access and experience music in all of its forms via HMV," he said.

Among the initiatives will be HMV loyalty card holders being able to "earn" tickets to gigs as rewards.

The engagement of artist and fan is the key driver of the music industry
MAMA Group

The MAMA Group said the deal "alters the face of the live venue business in the UK".

"The engagement of artist and fan is the key driver of the music industry and that engagement is at its most evident at live events," the firm added.

It said the venture with HMV would link tickets, music and merchandise. "A direct artist-to-fan relationship is a way to help the music industry grow and prosper," it said.



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