HMV, Britain's last national music chain, has collapsed into administration. The 92-year-old retailer breached its banking covenants on £220m in bank loans. DVD rental chain Blockbuster also collapsed this week. This follows the demise of electricals chain Comet and photography group Jessops. Major casualties last year included Game Group and Clinton Cards.
What the commentators said
The recession exacerbated the problems of these big high-street names, said The Times, but the underlying reason for all these bankruptcies is "shifting consumer trends". Part of the story is the rise of out-of-town shopping centres, but the main issue is the growth of the internet. "Consumers have little incentive to browse in shops when they can browse more easily from... their own sofas."
In music and in film, "online giants" such as Amazon beat the likes of HMV on price. The shift towards digital downloads has also hurt. HMV says that 25% of music sales are now downloaded onto mobile devices. "HMV has been living on borrowed time" for years.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
There is a positive side to all these retail deaths, said the FT. A precondition of a robust recovery is that "unsound businesses have to give way to new, healthier ones". But so far too few moribund companies have gone bust as interest rates have been historically low and banks with holes in their balance sheets have been reluctant to realise the full extent of bad loans.
So "an army of zombie companies" has been kept alive, preventing capital from shifting to more productive areas of the economy. But now the series of retail bankruptcies "implies that the war on zombies has begun".
Not so fast, said Robert Peston on BBC.co.uk. The overall trend of corporate deaths hasn't actually risen significantly, according to leading administrators. It just seems that way due to the high-profile retails crashes. There are still "far too many corporate zombies clinging on" and thwarting the development of firms with much better prospects.
-
Rents rise at slowest pace for four years – is buy-to-let still worth it?Slowing rental growth and higher property taxes are creating a headache for landlords. Does buy-to-let still offer a good yield?
-
Should you bag a bargain with a half-price investment trust?Twenty-six investment trusts look cheap by historic standards, with some trading at a discount of more than 50%. Are they a bargain or value trap?
