Budget tax hikes force HMV to pause UK expansion

HMV has put its UK expansion on hold and will instead open new stores in Ireland and Belgium, citing rising wage costs set to take effect next month.

Phil Halliday, MD of the entertainment retailer, said the company had hoped to open up to 10 more UK stores this year but had to pause those plans as it worked to maintain profitability despite strong sales growth.

Sales rose 6.5% to £189.6m in the year to 30 May 2024, driven by the reopening of its Oxford Street store in London and a resurgence in traditional formats such as vinyl and CDs.

However, pre-tax profit fell by over 6% to £4.9m as rising costs, particularly higher wages, squeezed margins, according to newly filed accounts.

Halliday said demand for exclusive releases from artists such as Taylor Swift, Billie Eilish, and Charli XCX—along with renewed interest in classic albums from artists like Oasis—was driving a 15% rise in vinyl sales and a 5% increase in CDs.

“Growth is great but we are just about covering cost increases,” Halliday told the Guardian. “It is quite frustrating at times.”

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With UK expansion currently on hold, the company is moving forward with international plans.

A new store will open in Limerick, Ireland, in June, followed by a second location in Antwerp, Belgium, this autumn, adding to its existing stores in both countries. HMV is also set to launch its online store for customers in Ireland and mainland Europe later this month.

Halliday said the company aims to open up to 10 stores per year across Europe from late next year while still hoping to expand in the UK if conditions improve.

The decision to pause UK growth follows the government’s announcement in October that national insurance contributions for employers would rise from 13.8% to 15% starting this April, increasing the cost of hiring workers.

Halliday argued that the government should have brought forward planned business rate relief—set to benefit stores with a rateable value under £500,000—from 2026 to this year to help retailers manage the additional costs.

“Hopefully the moves on business rates next year will change the picture a bit,” he said.

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