Thursday 17 January 2013, 11:49 | By Chris Cooke
HMV shuts Irish stores as Blockbuster UK goes into administration
While HMV’s UK stores remain operational as administrators from Deloitte attempt to find a buyer for the flagging entertainment retailer, the company’s sixteen Irish shops closed yesterday, according to Reuters. The news agency reports that a notice outside HMV’s store in Dublin’s Grafton Street reads “closed until further notice”.
Whereas HMV UK went into administration on Tuesday morning, the receivers have been called into the company’s Irish business. The Irish equivalent of going into administration is known as ‘examinership’, whereas calling in the receivers is a more severe option, with the accountants appointed to oversee the process primarily briefed to secure the maximum possible return on the company’s assets for creditors, rather than to negotiate with relevant stakeholders and possible buyers in a bid to rescue the company.
That’s not to say that Deloitte Ireland won’t also look for bidders interested in acquiring HMV Ireland as a going concern, but the company’s stores in the country will shut in the interim, and the chances of a happy ending at the conclusion of the process are much lower. It seems unlikely that any of the parties linked to bids for some of the UK HMV business will be interested in the firm’s Irish stores, and Deloitte is likely to treat any possible sale of HMV UK and HMV Ireland separately.
The collapse of HMV Ireland puts about 300 jobs on the line. As of yesterday those employees were temporarily laid off, pending any sale of the Irish business. There was seemingly some confusion as to whether HMV staffers in Ireland would be paid salaries they are owed for work already done this month, which reportedly led to staff in a few stores refusing to leave until that matter was clarified.
Staging a sit-in, staff at the branch in Limerick’s Crescent Shopping Centre tweeted: “We just want what we’re owed. The shop is profitable and we’ve been let down by our UK counterparts”.
Meanwhile, in both Ireland and the UK, there has been some anger about the voucher situation, HMV refusing to redeem any of its vouchers since the company went into administration. While this is pretty standard when retail firms enter administration, it is always an unpopular move, especially when it occurs so soon after Christmas, with HMV vouchers in particular a popular Christmas present. As numerous affected customers hit out online and in the papers, one man in Ireland who had given his grandson a €40 voucher for Christmas reportedly took said grandson to his local HMV store to take away €40 worth of goods, much to the annoyance of store security.
One Tory MP back in the UK, meanwhile, accused HMV bosses of virtual theft for continuing to sell vouchers up to the very moment the company went into administration, when directors must have known there was a very real chance they could never be redeemed.
Tony Baldry, a commercial lawyer by trade, told reporters: “Directors and management must have known that the company was at very real risk of failure [and yet the company] continued selling vouchers all through Christmas and up until the day they went into administration”.
He added that there was now a “legitimate question” as to whether HMV’s directors were “obtaining property by deception, ie offences against the Theft Act, in allowing their stores to continue to sell vouchers and gift cards when they must have known that there was little prospect of those vouchers or gift cards ever being redeemed”.
A spokesman for the HMV board, though, argued that the company’s directors genuinely believed the firm could be saved from administration until the last moment. In a statement, the spokesman said: “Until as late as early afternoon on Monday, the directors believed that they had a reasonable prospect of avoiding insolvency and were satisfied that they were complying with all of their legal obligations including in respect of gift cards. When it became clear to the board late on Monday afternoon that they had no option than to file for administration, they issued immediate instructions to all stores to stop selling gift cards”.
As previously reported, Deloitte is in talks with various parties interested in buying some of the HMV business, though most expect at best a very streamlined version of the company to come out of the administration process.
In a rather bad week for entertainment retail, Blockbuster UK also went into administration yesterday. The DVD rental firm’s US owners opted for administration after the company only broke even in 2012. Bosses had hoped to make a profit to help fund a controlled downsizing of the business which, although still boasting two million customers in the UK, is clearly facing an uncertain future as movie-on-demand services over the net expand. Blockbuster’s stores will stay open in the meantime and, presumably aware of the voucher rage that has ensued since Jessops and HMV hit the wall, the company will continue to accept valid vouchers in the interim.