- Retailer has struggled in the face of growing demand for digital downloads
- Company had a poor Christmas sales period despite 35% sales reduction
- Almost 300 stores and 4,350 staff face uncertainty as negotiations unfold
- Administrator announces gift cards will not be accepted in stores
By Rob Davies and Hugo Gye
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Thousands of gift cards given as Christmas presents are worthless as HMV announced it would no longer accept vouchers after collapsing into administration.
The historic music shop has become the latest high street victim of the financial crisis and double-dip recession, and its 4,000 employees are facing the axe if a 'white knight' rescuer cannot be found for the chain.
City firm Deloitte was brought in to take charge last night after crisis talks failed to find another solution - putting HMV on course to be the second household name to go under this year.
Today it was revealed that the chain will no longer accept gift cards and vouchers as Deloitte takes charge of the 238 stores.
Threatened: HMV could be forced to close its shops and lay off 4,000 staff after going into administration
Many Twitter users reacted with fury to the announcement that the shops will no longer accept its own gift cards as payment, just weeks after hundreds of them were bought as Christmas presents.
'It's a p*** take that HMV won't accept vouchers,' @Meygziie wrote, while @KevinAshford7 said, 'That's my ?20 Christmas gift voucher going in the bin.' @NiceEtoile added: 'How is this legal?'
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BBC journalist Hugh Pym was one of the customers affected by the controversial decision. He took to Twitter to write: 'Oh dear. Administrators say HMV won't accept gift vouchers - inc my teenagers' Christmas pressie.'
The cards are currently worthless, but if HMV finds a buyer it is possible that the new owner will honour them, meaning that it may be worth people's while to hold on to the cards.
The writing had been on the wall since the run-up to Christmas, when dire sales figures forced the firm to admit it might breach the terms of its bank loans.
Struggling: The venerable chain has been hit hard by the rise of digital music and online retailers
Change: Shoppers have spurned physical copies of music, film and books in favour of downloads
HMV?s banks ? state-backed Royal Bank of Scotland and Lloyds ? said they were unwilling to go on lending it money.
The move to go into administration follows the closure of camera chain Jessops with the loss of 1,300 jobs at the weekend.
It is still possible that a ?white knight? buyer could ride to the company?s rescue at the last minute, buying part or all of its 230-strong network of stores. If not it will mean the end of a name that has graced the high street since 1921.
There was no sign of a saviour for HMV today, after US-based investment firm Apollo Management walked away from takeover talks.
Web users paid tribute to the legendary chain as they shared memories of shopping at HMV - but some took a more cynical tone. Rapper Professor Green tweeted: 'HMV bankrupt. We may as well just give up on any medium that involves hard copy and get on with it. #sadtimes'
Flagship: HMV's store on Oxford St pictured in 1939, offering 'home entertainment and electric housekeeping'
Iconic: Nipper the dog, left, and the HMV delivery van, right, are among the famous symbols of the store
CARNAGE ON THE HIGH STREET
HMV's announcement that it is to go into administration makes it the latest in a long line of high-profile high street firms to fail - the most visible legacy of the financial crisis and subsequent double-dip recession.
December 2008: MFI, the furniture retailer, was one of the first major firms to go out of business at the start of the downturn, as retail sales began to fall following a sharp rise in unemployment
January 2009: Woolworths shuttered its 800 stores, bringing home to many the scale of the UK's economic collapse as the country entered recession for the first time
February 2009: Zavvi, HMV's chief rival, stopped trading around Christmas - and refused to honour its gift cards, leading to widespread customer anger
December 2009: Borders was another entertainment behemoth to go under as sale of CDs and DVDs were squeezed by digital downloads and online retailers
October 2012: JJB Sports closed all but 20 of its stores, which were taken over and re-branded by Sports Direct - leading to the death of the JJB brand and 550 employeeds losing their jobs
December 2012: Comet shut down just before Christmas, leaving nearly 7,000 staff out of work and forcing the taxpayer to pick up a ?50million tab related to its bankruptcy, which was blamed on soaring energy prices and a reduction in the number of home buyers
January 2013: Jessops was closed by administrator PwC earlier this month after years of struggling with online competition as customers turned away from traditional photography
NEXT? Past Times, Blacks and Hawkin's Bazaar are among the many other firms which have entered administration but been able to survive in some form. However, as the economic recovery remains fragile these companies could tip back into serious trouble.
Labour business spokesman Chuka Umunna said: ?For the sake of HMV?s employees, we hope a way can be found to keep the business going ? the demise of this institution would be a body blow to British retail.?
Administrators could opt to keep stores open during the process in order to raise funds by shifting as much stock as possible. HMV failed to keep pace with the digital revolution, as shoppers turned to online retailers such as Amazon.
Internet firms were able to undercut the company thanks to lower overheads.
It has also been under attack from supermarkets such as Tesco and Sainsbury, which are able to offer discount DVDs and CDs thanks to their size.
The beginning of this year has seen HMV offer massive discounts in the hope of filling its stores and boosting revenues.
But despite the efforts, dismal Christmas sales were the final straw for the firm?s banks. HMV is understood to have asked them for a ?300million lifeline, but was turned down on the evidence of its recent performance.
The decision by RBS and Lloyds to pull the plug on HMV is likely to cause a backlash, given that they were both bailed out by British taxpayers during the financial crisis.
The appeal for help from the two lenders came just days after the company asked suppliers to give it ?300million to pay off its debt and revamp its business model.
That request was also turned down.
If HMV's stores do close down, they will push up the sky-high vacancy rate on British high streets. More than one in nine stores is currently standing empty, according to the British Retail Consortium, as consumer confidence continues to flounder in the wake of the struggling economic recovery.
Neil Saunders, managing director of retail consultancy Conlumino, said the collapse of HMV was inevitable.
'While many failures of recent times have been, at least in part, driven by the economy, HMV's demise is a structural failure,' he said.
'In the digital era where 73.4 per cent of music and film are downloaded or bought online, HMV's business model has simply become increasingly irrelevant and unsustainable.'
Are you an HMV employee who will be affected by the news?
Please call 0203 615 3594 or email hugo.gye@dailymail.co.uk
Jokes: Twitter users, including the BBC's Jeremy Vine, posted witty pictures about HMV's demise
Disappointment: Journalist Hugh Pym was among the customers who had bought HMV gift cards
HMV ON THE BRINK OF EXTINCTION AFTER 90 YEARS ON THE HIGH STREET
HMV stands for His Master?s Voice, the name of an 1898 painting of a dog called Nipper listening to a cylinder phonograph (right).
Rights to the image were bought the following year by the Gramophone Company, who asked the artist to repaint the work with a wind-up gramophone.
The Gramophone Company opened the first HMV store on Oxford Street, central London, on 20 July 1921.
It later merged with the Columbia Gramophone Company in 1931, to become EMI. They opened HMV stores across the UK and by 1977 had 39 stores stretching from Glasgow to Brighton.
HMV Media Group broke away from EMI in 1998. Today the group runs 239 stores in the UK and Ireland.
The company has 4,350 employees in the UK.
Nipper, the subject of the HMV logo, is buried in Kingston upon Thames in a small park surrounded by magnolia trees. A small road nearby was renamed Nipper Alley in his memory in 2010.
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