How HMV's collapse could spell trouble for the rest of the high street

HMV's bankruptcy puts thousands of jobs at risk, but if the company disappears completely, the rest of the high street could be even worse.

Intu (INTU.L), the property group that owns some of the UK's best-known shopping centres, such as Lakeside in Essex and the Trafford and Arndale shopping centres in Manchester, is the landlord of 15 HMV sites, the largest stake in HMV of any group, according to a report in The Times.

The group has been under pressure this year due to problems on the high street and the collapse of a planned takeover by property rival Hammerson (HMSO.L) in November. Without HMV, it may not be able to cut rents for other struggling retailers. Other landlords could face similar problems.

HMV stores are not yet closed, but anyone with vouchers has been asked to use them quickly, indicating the possibility of an imminent closure. An offer from a potential buyer could save parts or all of the group. However, if HMV were to close, 2,000 jobs would be at risk and 128 stores could close.

The 15 stores HMV operates in the Intu properties account for £3.3m of the £546m gross rent the shopping centre group takes in each year. That's a significant proportion, but it's not the only pressure on the business.

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In November this year, Mike Ashley, a shareholder in Debenhams, which owns House of Fraser and Sports Direct (SPD.L), warned that stores could be “torn to pieces” by one of the worst Novembers on record for city centre retailers before the tough Christmas conditions hit, as he sought to slash rents at Intu centres for four of his House of Fraser stores.

Intu rejected his demands, and Ashley in turn threatened to withdraw 17 of its stores from the company's locations.

An Intu spokesman told the newspaper: “We have been working closely with HMV over the past few months to help them relocate to smaller, lower cost units.” This too would reduce the revenue of a major high street figure and impose cost pressures on a sector under pressure.

The collapse of HMV could now put pressure on Ashley and the rest of the high street, where footfall has already fallen by 3.1 percent on Boxing Day, according to retail analysis firm Springboard.

Intu's clients include other well-known companies that are under pressure. In December, Primark's owner Associated British Foods (ABF.L) warned of difficult trading conditions “in a tough retail market”. The takeover of Wagamama by Restaurant Group (RTN.L) for £559 million led to share price losses and Game Group (GMD.L) had previously filed for bankruptcy. All rental sites are owned by Intu.

If the music retailer disappears entirely or is only partially rescued and demands a reduction in its rental obligations in order to survive, then Intu may have no choice but to comply – and there will be even less scope for the company to meet demands for discounts from other customers. This could trigger a domino effect that affects both landlords and businesses.