HMV looks to a boost from Woolies collapse

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"It's very sad what's going on at Woolies," he said. "They have about 10% of the entire UK entertainment market. At the same time people like WH Smith, Asda, Sainsbury's, Borders and, of course, Zavvi who all used Woolworths' EUK for supplies seem to be managing to source top sellers like Take That from other distributors.

"There have been unprecedented changes to the competitive landscape of the entertainment sector over the last two weeks which we believe will strengthen HMV UK for the medium term."

Fox said conditions on the High Street have become considerably worse since the group's half-year end on 25 October. Up to that point, group like-for-like sales were flat with HMV up 1.6% and Waterstone's down 3.1%. "In this environment, zero is the new up," he quipped.

But HMV sales began to move into negative territory in September and October, and in the last five weeks are probably down "something like two, three or four per cent," he said.

However, the real fall-off has been in books, where shoppers are hanging back from buying hardback celebrity autobiographies by the likes of Michael Parkinson, Paul O'Grady and Julie Walters. These are being heavily discounted by the supermarkets and online sellers, and Fox observed: "They are clearly discretionary purchases. It may be that Christmas is once again running later than usual and there will be a late take-up as people make last-minute present purchases."

But he admits it is too early to predict the success of the crucial selling period of HMV and Waterstone's, and thus the outcome for the year. One success has been the Sony e-Reader, with Waterstone's selling of every one it can get.

HMV's half-year sales were up 3.5% at £755 million, and the usual first-half losses were reduced from £28.7 million to £27.5 million. The interim dividend is unchanged at 1.8p.

HMV has also refinanced a syndicated £220 million bank facility for the next three years. Reflecting the credit crunch, the rate on the facility has risen to 2.5% over Libor from 1.75%.