Q&A: HMV administration

HMV has become the latest high street casualty as it announced last night it was calling in the administrators.

Britain’s last major high street music chain held talks with its banks over the weekend but failed to secure an emergency rescue package.

As a result, the company announced on Monday that it had ceased trading on its shares with immediate effect and would be appointing Deloitte as administrators.

The collapse comes just days after camera retailer Jessops suffered the same fate, indicating that the challenges being faced on the high street are far from over.

Here, we will explain what exactly has happened at HMV and what it will mean for you.

How did HMV end up in this position?
In truth, the demise of HMV has been a long time coming, as it was squeezed by online giant Amazon and supermarkets offering cut price music and DVDs.

Analysts claim the chain was simply too slow in getting involved in the digital music market, while it was always going to struggle to compete on a price basis against the might of Britain's supermarkets.

So HMV has collapsed – what happens next?
HMV issued a statement saying that “it is the intention of the administrators… to continue to trade whilst they seek a purchaser for the business."

So stores have opened as normal today. However, it will be a surprise if we don’t see at least some store closures in the future. At present, HMV has just under 240 stores across the UK and Ireland.

Are vouchers still valid?
HMV has confirmed it will not be accepting gift cards or vouchers. Unsurprisingly, the decision has outraged customers, many of whom will have been given them as Christmas presents but not yet redeemed them.

However, don’t throw your gift cards in the bin just yet. Ultimately it is up to the administrators to decide whether or not to honour them and, while HMV’s customers are obviously not their main concern, there’s a small chance they might change their mind.

You lose nothing by holding on to them for a little while longer.

And what about extended warranties?
If you’ve purchased an extended warranty through HMV for a device, the news is far more positive. This is because HMV's warranties are actually provided by a third party - Allianz Insurance - meaning they are still valid.

What does this mean for their staff?
HMV employs more than 4,000 people, who are all facing an uncertain future. As we mentioned earlier, it’s likely that we’ll see store closures and, with it, job losses. However, it must be stressed that nothing is certain at this early point.

Will HMV disappear from the high street altogether?
There’s a good chance it will remain. Although it has debts, analysts predict that around half of its stores could actually be run at a profit. What’s more, HMV is an instantly identifiable brand and that will no doubt attract potential buyers.

Expect to see someone willing make a bid for at least part of the business.

Will HMV hold a fire sale?

The store’s directors have said this will be a decision for the administrators.