HMV Warns on Profit, Announces Turnaround Plan

British music and books retailer HMV issued a profit warning on Tuesday as it announced a three-year plan to cope with tough competition from supermarkets and Internet retailers.

The British firm, which runs music shops under its own name as well as Waterstone's bookstores, said it would run trials of a new HMV store format in the autumn and sell a wider range of portable digital products from suppliers like Apple.

It will also introduce a new loyalty card, increase marketing of its Web sites and aim to achieve 40 million pounds ($77.5 million) a year in cost savings by 2009-10.

In the short term, however, trading will remain tough.

"Since the group's last trading update in January, trading conditions have deteriorated further, particularly in our overseas markets and at Waterstone's," HMV said in a statement.

"It (the board) now expects full-year profits to be below the current range of market expectations."

A spokeswoman said analysts' full-year profit forecasts ranged from 55 million pounds to 65 million pounds.

Under new Chief Executive Simon Fox, who joined in September from electricals retailer Kesa, HMV had already issued a profit warning for this financial year in December.

Its shares have underperformed the UK retail sector by 26% over the past 12 months, but have rallied in recent days on optimism about the strategic review.

The stock closed at 152-3/4 pence on Monday, valuing the business at about 615 million pounds.