Golden Discs, the biggest Irish-owned music chain, has blamed "unsustainable" rental increases in its high street stores for a 17 per cent fell in pretax profits to €706,881.
The chain has initiated a review of its 27 branches and it indicated last night that it might close certain stores or relocate them to shopping centres as a result of this exercise. "Whether stores are closed or not is up for review," said a spokesman.
With rising demand for online music eating into the retail market, chief executive Tony Killoran said downloading posed an unquantifiable threat to the revenues of traditional music shops.
Mr Killoran said the chain's turnover fell by 3 per cent to €37.5 million in the year to March. Pretax profits were down from a trading pretax profit of €858,085 a year earlier, before an exceptional €350,000 bad debt write-off brought the profit to €508,085 before tax.
Despite the fall in pretax profit margins to 1.88 per cent from 2.23 per cent a year earlier, Golden Discs said its financial performance was satisfactory given the difficulties in its market.
While the company circulated basic financial figures yesterday, the company's spokesman said there was no-one available in the company last evening to release a full set of accounts. The accounts were lodged this week in the Companies Offices. Such filings typically include notes which provide a more detailed account of a firm's financial situation.
"Rents continue to be a huge factor in our cost base and will be the prime consideration in our branch review. For example, rents in high street locations are becoming unsustainable. To counteract this we plan to relocate to shopping centre sites, where practical and available," said Mr Kiloran.
"We continue to operate effectively in a highly competitive market. Uncertainty affects our industry and we, as a company, are not immune . . . We need to consolidate our branch network and invest in the development of our network of existing stores."
The company said it will continue to focus on managing costs and maximising branch performance. The chain has opened a new outlet at the Jetlands centre in Limerick and it plans to open a new outlet this spring at the Manor Mills Centre in Maynooth, Co Kildare.
"Other retail property developments countrywide will also afford the company the opportunity to establish the Golden Discs brand in locations not previously considered. Coupled with this will be the opportunity to avail of larger square metre retail space."
The difficulties faced by Golden Discs are common to its rivals. Sir Richard Branson's Virgin group suffered a sharp downturn in the Irish market in 2004, with pretax losses at his chain more than trebling to €2.77 million in its most recent figures. Pretax profits for HMV Ireland fell to €7.68 million in the year ending on April 2004, from €8.26 million a year earlier. Sales rose to €61.3 million from €60.47 million.
