HMV, one of the UK's leading music retailers, said music and DVD markets had deteriorated over the last quarter and warned that its annual profits were now expected to be at the lower end of market expectations.
The group, which also owns the Waterstone's book chain, said it was dealing with "very difficult conditions" despite the run up to the normally busy Christmas period.
HMV said it expected the high street environment to remain difficult for the rest of the year as it reported group like-for-like sales fell 1.
3 per cent during the 12 weeks to December 16.
"The value of the UK music market, including digital downloading, declined by 14 per cent during October and November and the DVD market also declined in value," HMV said.
Like-for-like sales at its Waterstone's bookshops also fell 3.
7 per cent in the 12 weeks to December 16.
However, there was a glimmer of good news. "Within these very difficult conditions, HMV UK and Ireland's like-for-like sales for the 12 weeks increased by 0.
6 per cent, and gross margin is expected to be in line with market expectations," it added.
That, the company said, meant full-year profits would be at the bottom of expectations.
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