TORONTO • The digital music and movie boom has claimed another bricks and mortar victim, with HMV Canada set to close all of its 102 stores in the coming months after 30 years in business.

The ailing company, which first opened its once-expansive stores in Canada in 1986, was put into receivership in Ontario Superior Court Friday and the majority of its head office staff was laid off.

“The company and major suppliers were unable to reach an agreement, on mutually acceptable terms to sustain HMV’s operations and support a recovery,” said court documents filed Friday on behalf of the company. HMV’s stores in nine Canadian provinces will remain open for several weeks in order to liquidate remaining inventory, the company confirmed Friday. HMV owes its major suppliers, including music labels and media studios, $56 million as of Dec 31.

Before the birth of e-commerce, HMV, much like defunct retailers Tower Records and Sam the Record Man, offered customers a one-stop, big-box style shopping experience with a deeper back catalogue selection than small record stores could offer.

The Canadian unit was an offshoot of HMV’s U.K. operations, where it had opened its first store in 1921. While HMV is still a going concern in Britain, HMV Canada has operated as a separate company since 2011, when it was sold to British retail restructuring specialist Hilco UK for $3.23 million.

Digital music has been around for more than a decade but it only became the primary revenue stream for recorded music globally in 2015, overtaking the physical sales of albums and CDs, according to London-based industry association IFPI. Total industry revenues grew 3.2 per cent in 2015 to US$15 billion, with digital music revenue accounting for 45 per cent of sales worldwide compared with 39 per cent for physical music sales.

In recent years, HMV Canada had reduced its CD and DVD inventory and added more vinyl albums, fan collectibles and apparel in an attempt to make up for sliding music and movie sales. It also closed larger stores and leased smaller retail spaces in order to control costs and maintain its footprint across the country.

But HMV’s sales fell to $214.4 million in fiscal 2015 from $225 million in the prior year, the court filing said, and sales are projected to slide to about $190 million for fiscal 2016. That is just over half of what HMV’s sales were for the year ending April 24, 2010, when it recorded annual sales of $360 million.

As of Nov. 30 the company had assets of $63.9 million and liabilities of $131.8 million. It incurred net losses of about $20 million between fiscal 2013 and 2015, and projects another loss for fiscal 2016, the filings said.

Financial Post

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