HMV hits a dud note

MUSIC-to-books retailer HMV became the latest High Street retailer to point to a lack of consumer confidence for a downturn in trading. The company said that like-for-like sales after Christmas had tailed off with a 2.2% on a same-store basis.

Its comments were underlined by similar remarks from Matalan and French Connection today. But HMV has partially been a victim of its own success because it is struggling to beat very strong numbers from a year ago. HMV said it had a strong market share and sales of DVDs and music had increased ? but on a like-for-like basis, sales at HMV UK and Ireland were down 3.8%.

The group, which owns HMV and Waterstone's, defied pessimists over Christmas with a much better than expected result over the festive period. But it admitted today that consumer spending in the 14 weeks to the end of April had been weak.

Waterstone's managed to keep its number one position in the High Street books market but like-for-like sales were still 2.8% adrift. HMV insisted that full-year profits will still meet City forecasts but its trading update confirms that the trading climate on Britain's High Streets remains very difficult.

Retailers hope that the General Election will help clear the air in consumers' minds but most believe that it will take some time before shoppers start spending money again as they were a year ago.

Hundreds of thousands of homeowners who took on cheap fixed rate mortgage deals between 2002/03 when interest rates bottomed out are looking at big increases in their monthy payments when the fixed rate periods end in the coming months. With interest rates now at 4.75%, many mortgage holders are looking at hefty increases in monthly payments, a fact that looks set to heap fresh misery on hard-pressed retailers this summer.

The retail sector's woes come just a day after the Confederation of British Industry (CBI) revealed the sharpest drop in retail sales in April since the recession of the early 1990s.