HMV Group May Need to Sell Waterstone’s to Buy Time

HMV Group Plc, the U.K.’s biggest music and DVD retailer, may need to sell its Waterstone’s bookstore chain, suspend its dividend or offer shares as time runs short to develop a business model for the digital age.

The retailer probably needs five years to shift its business away from CDs and DVDs and become a web- and mobile phone-based destination, said Mark Mulligan, an analyst at Forrester Research. With a banking covenant test due in April and suppliers having credit insurance reduced, it may need to buy time to implement such a strategy, analysts say.