HMV beats gloom with a record sales boost

Simon Fox, parachuted in from electricals chain Kesa and 10 months into his three-year turnaround plan, said: "It's been our best Christmas certainly since HMV floated on the stock market in 2002 and probably in our entire 86-year history.

"Games were very, very strong but we saw good growth across all categories including DVDs, books and even music."

He said that while he is as aware as anyone about the talk of dwindling consumer confidence, neither chain is seeing the effects.

He added: "Our average ticket price is just £10, which I think is the level that people still feel they can afford without it being a luxury. It seems to be the big ticket stuff which is not shifting so well on the High Street. In real terms prices of DVDs, CDs and books are still coming down."

Fox said profits for the year to April should come in at the upper end of City forecasts, which ahead of today's news ranged from £43 million to £53 million.

HMV Group's like-for-like sales rose by 9.4% in the five weeks to 5 January but the HMV chain saw a staggering 14.1% rise in same-store revenues. That compares well with its High Street rivals Game Group, which saw a stellar 32% rise, and Zavvi, the former Virgin Megastores, which reported a 10.8% rise over Christmas.

Importantly, HMV's growth was not driven by huge discounting, with gross profit margins steady despite a higher proportion of sales of video games which produce lower margins. Fox reckons HMV's sales of video games and consoles was actually ahead of Game Group, up by 50% and now accounting for 18% of the chain's sales. That was the target he set on his three-year plan.

DVD sales increased by 12%, well ahead of a market which was up 6% with four million-plus sellers this Christmas compared with just one million last year. HMV also outperformed in music, where the whole market fell 12% by volume but its sales rose 2%.

At Waterstone's the picture was not quite so rosy but still a great turnaround from Christmas 2006 when sales fell 2% to this year's growth of 4%. There was a good range of best-sellers in fiction, cookery and autobiographies. Nick Bubb, retail analyst at brokers Pali International, said today's figures had beaten even his upbeat forecasts and predicted profit upgrades.