Half-year results from HMV Group show that this is a bleak midwinter indeed, with total sales for the six months to 25 October 2008 flat and Waterstone's like-for-like sales down 3.1% - or 1.4% after adjustment for Harry Potter and the Deathly Hallows . Group CEO Simon Fox acknowledged 'a very challenging market, which contracted by 5% over the period, impacted particularly by poor performance in the non-fiction category', but pointed out that, 'at this stage in our financial calendar, we still have our peak trading period ahead of us. Our stores and websites are very well prepared for Christmas, and we are confident that our customers will receive great service and product availability, however they choose to shop.' Total sales for the Group, including HMV International, were £754.5m, up from £729m in the same period last year - a year-on-year growth of 3.5%. Waterstone's turnover was £235.1m - down from £244.5m in the same period last year, representing a year-on-year decline of 3.8%. Operating losses were up, the Group as a whole from £12.6m to £13.5m on the same period last year, Waterstone's from £8.9m to £9.3m.
The figure includes the £1.5m year-on-year increase in costs from the BookHub supply chain implementation. The underlying improvement in the operating loss reflected a 60 basis point increase in gross margin (after adjusting for Harry Potter) and tight control of operating costs, which fell 1.2%, more than offsetting the sales decline.
The bookselling chain grew market share 'marginally, reflecting the benefit of continued online growth and the success of the Waterstone's loyalty card', which has attracted 2.1m members - exceeding in just one year the chain's three-year target of 1.5m. New product ranges such as stationery performed well, with sales up 20% on last year. Both instore and online sales benefited from the successful and exclusive launch of the Sony Reader.
Fox described the results as representing 'a solid start and we are trading where we expected to be'. The sales decline at Waterstone's came entirely from a lack of major non-fiction best sellers. Last year provided several £1m-plus sellers - The Blair Years, The God Delusion, Gordon Ramsay and Bill Bryson's Thunderbolt Kid. This year has seen just one, by Gordon Ramsay.
Shares fell sharply on the morning announcement, then recovered to trade above average for the week by mid-morning.