HMV has been pinning its hopes on the internet to spur growth

Like-for-like sales - which ignore new store openings - fell 0.8% in the five weeks to 6 January, though price cuts helped raise music store sales by 0.7%.

But in the six months to October 28, tough competition and poor music sales saw the firm slump to a £36.4m loss.

HMV said it had delivered an "improved performance" over Christmas.

But its shares fell 4% as investors worried about the overall state of the music retail market.

Chart move

The markets in which we operate continue to be very difficult Simon Fox, HMV chief executive See HMV's share price

It said it was particularly encouraged by online sales at HMV which rose 200%.

But like-for-like sales at book chain Waterstone's fell 2% over the festive period.

"The markets in which we operate continue to be very difficult," said chief executive Simon Fox.

"The actions the group has taken to improve its competitive position are yielding benefits but these are not sufficient to offset the profound changes taking place in our markets."

HMV has been hit by a collapse in singles sales due to the huge increase in the number of people downloading music.

It revealed on Tuesday that it was dropping the official UK singles chart from its stores after more than 40 years, saying it was no longer relevant to the way it sold music.

Management changes

After across-the-board price cuts on albums in September, HMV saw a 2% increase in market share.

But it said the value of overall music sales in the UK was down 13% over the first half of the year.

The £36.4m loss for the past six months compared with a £200,000 profit in the corresponding period the year before.

HMV also announced that Steve Knott is stepping down from his role as managing director of HMV in the UK and Ireland by mutual consent.

Mr Knott, who has been with the firm for 16 years, will be temporarily succeeded by Mr Fox until a permanent replacement is found.