If you gave or received HMV vouchers this Christmas, the news of the company’s move into administration may have added a little disappointment to your festivities. But don’t worry, the current advice is to get them spent as soon as possible so that you don’t lose out.
What does ‘going into administration’ mean?
The system of placing a company into administration is overseen by HMRC, but it is not technically a tax issue. It is about a business being unable to settle its debts and trying not to go into liquidation. We’re covering it here because it is a relevant issue for our readers.
A business that has more debt than it is able to pay can go into a state of administration. If a company goes into administration, it means that an administrator has been appointed to maximise the company’s assets to settle as many debts as it can. The administrator of the process has to hold the status of insolvency practitioner and they assume full control of the company and all its assets.
An administrator considers all the options for the company, including selling it to another party. It is not an automatic closing of the business. All the business decisions for the company are now taken by the administrator. The main aim is to make sure that all debts are paid, including; suppliers, staff and, of course, taxes.
What does this mean for HMV’s customers?
Well, the shops are still open and trading. The administrators for HMV are a company called KPMG. They have said that they will honour any vouchers used in the stores for as long as they are open, but you cannot buy any more gift cards. HMV will only accept exchanges for unwanted goods, not refunds. So have a think about which album or film you would like to swap for your unwanted present.
There isn’t any clarity about their policy on refunds for online purchases at the moment. Likewise, for orders that you may have placed online and are still waiting for. KPMG have said that they will fulfil any orders “where there is stock available to do so”, but it may be delayed further. In other similar cases, customers are sometimes refunded for their outstanding orders.
No refunds given
If the administrators decide not to refund people for their outstanding orders, there are two options depending on how you paid and how much you spent.
- Paid by credit card and spent over £100: try using Section 75 of the Consumer Credit Act, which states that the credit card company is as liable as HMV. Each item must be priced at a minimum of £100 for this to be viable.
- Paid by debit card and spent under £100: try using the charge back system, this means that your bank card provider requests the money back from HMV because you never received the items you paid for. Your bank is the place to claim in this way and it must be done 120 days from when you realise there is a problem and 540 days from the purchase date.
HMV, like many retailers, has its own loyalty scheme called PureHMV. This is “temporarily unavailable” and is not part of the administration. Therefore KPMG cannot answer questions about using the points you have or if it will continue in any way.
Why has this happened to such well-loved British shop?
HMV and Hilco’s executive chairperson, Paul McGowan, said: “During the key Christmas trading period the market for DVD fell by over 30% compared to the previous year and, whilst HMV performed considerably better than that, such a deterioration in a key sector of the market is unsustainable. HMV has clearly not been insulated from the general malaise of the UK high street and has suffered the same challenges with business rates and other Government-centric policies which have led to increased fixed costs in the business.”
“Business rates alone represent an annual cost to HMV in excess of £15 million. Even an exceptionally well-run and much-loved business such as HMV cannot withstand the tsunami of challenges facing UK retailers over the last 12 months on top of such a dramatic change in consumer behaviour in the entertainment market.”
James Daunt is the head of Waterstones and has led this company since it was bought by Alexander Mamut in 2011. Interestingly, Waterstones and HMV previously had the same owners, making Mr Daunt’s understanding of their situation even more pertinent. He said that their marketplace is “particularly challenging” and that HMV were “relatively unimaginative” with their shops’ development and modernisation.
As reported by the Financial Times, he said: “They added things like technology and T-shirts but it is all aimed at the same relatively narrow [teenage to young-adult] demographic.” He had taken an entirely different approach in order to ensure Waterstones’ success and they “had looked very scientifically at how to get in a big range of ages, from kids to pensioners”.
Whatever the reasons, it is sad to see another mainstay of our high streets under such immense strain. Hopefully, KPMG will find a buyer so that the company can continue in some form. In the meantime, find your nearest HMV store and spend those Christmas vouchers before its too late.