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HMV on brink of collapse: consumers told to cash in gifts cards now

Music retailer goes into administration, which could leave vouchers worthless - we explain your rights

HMV is on the brink of collapse for the second time in six years putting 130 stores and 2,200 jobs at risk.

Consumers have been warned that gift cards could be left worthless after the high street store suffered poor sales leading up to Christmas. If a company is placed into administration, it affects customers’ rights to claim a refund or exchange their items.

Anyone with a gift voucher is advised to spend it as soon as possible to avoid being left out of pocket.

In 2013, HMV was saved from collapse when it was acquired by its current owner, Hilco.

Read more: your rights if a retailer goes bust

HMV customers: your rights explained

When a company goes into administration, your rights depend on the administrator. In a bid to save the company, it may decide not to accept returns or refunds.

Retailers in administration are also legally allowed to refuse gift cards – thousands of customers are thought to have received HMV vouchers over Christmas.

If yours are refused, you need to make a claim in writing to the administrators with proof of your vouchers.

However, because gift cards and vouchers are usually extremely difficult to redeem when a company goes into administration, it’s wise to use them as quickly as possible.

Which? managing director of Home Products and Services, Alex Neill, said: ‘It’s a worrying time for everyone when a company goes into administration but for customers, it’s important to remember that your consumer rights may be affected.

‘If you have recently bought anything from HMV, you may not be able to claim a refund or exchange the item if the company ceases trading. If you have gift vouchers you should try to spend these in-store as soon as possible.

‘If you are planning to shop in HMV and intend to buy something worth more than £100, make sure you use a credit card as you’ll be able to make a claim against your credit card company under Section 75 of the Consumer Credit Act if anything goes wrong.’

What happened to HMV?

The music chain store has struggled with the rise in media streaming services and felt the pinch over the Christmas period when DVD sales across the industry were down 30% on the previous year.

Executive chair of HMV and Hilco, Paul McGowan, said while HMV performed ‘considerably better than that, such a deterioration in a key sector of the market is unsustainable’.

He said in a statement on Friday: ‘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.’

HMV appointed KPMG as administrators on Friday 28 December. KPMG is yet to comment on the acquisition.

High street shops

The struggling high street

Poundworld, Toys R Us and Maplin have all gone bust this year, while Marks & Spencer and Debenhams announced plans to shut a large volume of stores.

House of Fraser was placed into administration in August, but was quickly snapped up by Sports Direct.

After the purchase, an announcement followed that it would be business as usual. But many customers were waiting on refunds for cancelled orders and gift card replacements.

Read more: House of Fraser rejects gift cards

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