Three-pronged strategy lifts HMV

HMV stores are now pushing into fashion, mobile phones and Blu-ray discs, while its swoop for festivals and gig venue owner MAMA Group has cemented its position in the fast-growing live market.

The firm has also overhauled Waterstone's after tackling supply chain problems, refocusing stores on local customer demand and selling almost one million e-books from its website so far.

The music and games firm posted pre-tax profits of 74.2m for the year to April 24, up from 63m previously, although current trading has suffered slightly due to the World Cup.

Chief executive Simon Fox said the retailer's three-pronged approach was on track so far.

"We are no longer a one-dimensional retailer facing rapidly changing product markets," he said.

The retailer, which has 285 HMV outlets and 314 Waterstone's stores, hopes to drive its product mix in fashion from 3 per cent at the end of last year to 9 per cent by 2013.

From a standing start three years ago, the firm's technology offer now stands at 6 per cent of UK sales, with aims to double this over the next three years.

"We have clearly demonstrated that the HMV brand can successfully stretch into new related product areas to compensate for the broad-based changes taking place in our traditional market," it said.

HMV's traditional music offering – helped by the failure of rivals such as Zavvi in the recession – still accounts for 28 per cent of UK sales although video games have suffered due to a lack of new consoles.

The 46m MAMA deal earlier this year meanwhile brings summer festivals such as Lovebox and Global Gathering and venues including London's Hammersmith Apollo and Forum, which both enjoyed record trading last year.

The firm hopes to build a business selling three million tickets a year and generating underlying earnings of 15m by 2012/13.

HMV also wants to rebuild profits at Waterstone's, which has been boosted by the collapse of rival Borders. Waterstone's, where like-for-like sales sank 6.2 per cent last year, was hampered by problems with its "book hub" distribution system and drafted in new management in January.