HMV Retail has closed all its seven stores in Hong Kong as it goes into liquidation in the wake of financial troubles as consumers increasingly shun CDs and DVDs in favor of streaming services.
In a filing to the Hong Kong stock exchange on Tuesday, HMV Digital China, which made HMV Retail its indirect wholly-owned subsidiary in 2016, said: “HMV Retail has not been generating sufficient revenue to cover its own operating expenses and there is no reasonable prospect of making any significant improvement on its financial performance or operation in the foreseeable future.”
“The emergence of AirPods has resulted in a significant drop in sales for our bestselling earphones, coupled with a seemingly saturated market for speakers, the lack of improvement in the traditional audio-visual sales and a general change in the economic environment,” the filing said.
As such, the company’s board decided to “voluntarily wind up HMV Retail” in the belief that doing so is in the best interests of the company and its shareholders as a whole, Chairman Stephen Shiu Ding-yat, Jr said in the statement, the Hong Kong Economic Journal reports.
Shiu believes liquidation of the retail unit, which has seen its income decline and resulted in the firm falling behind on rent payments, can help the parent company reduce its investment losses and put it in a position where it can allocate more resources and management efforts to other businesses.
HMV, which was founded in Britain in 1921 as a retailer of gramophone records, became a global giant when sales of CDs and DVDs flourished.
But it has suffered a sales slump in recent years mainly due to growing popularity of online music and streaming videos.
The Hong Kong operation, which was established 25 years ago, has been sold twice since the UK parent went into administration in 2013, RTHK noted.
In 2016 the HMV business in Hong Kong was sold to a Shiu company called China 3D Digital, which subsequently changed its name to HMV Digital China.
According to HMV Digital China, HMV Retail’s revenue in the three months that ended June was around HK$31.55 million, down 41 percent from the same period last year.
HMV Retail had previously been sued by several of its landlords, including MTR Corp. and New World Development Co., over delayed rents that amounted to more than HK$6 million.
HMV Digital China said it is negotiating with the landlords for settlement plans. Meanwhile, as liquidation proceedings get underway, efforts will be made to seek new investors, which can possibly help HMV Retail re-commence business operations.
Wong Sun-keung, an accountant who is one of the liquidators, revealed to media that all of HMV Retail’s full-time employees, about 70 of them, have been let go on Tuesday.
The workers were each paid HK$8,000 in respect of wage, HK$2,000 as payment in lieu of notice, apart from a severance payment of HK$8,000.
They can still seek unpaid wages through the help of the Labour Department, Wong said.
According to Wong, HMV Retail is currently more than HK$40 million in debt, including wage arrears, while its inventories, including gramophone records, earphones, CDs, DVDs and guitars, are worth about HK$9 million in total.
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