HMV is ending its books deal with Amazon as the UK music retailer and bookstore accepts it badly misjudged the threat from the internet.

The rupture comes as a number of European retailers reassess their internet strategies in the face of slow footfall and rising online sales.

For five years, HMV’s Waterstone’s books chain has effectively licensed its brand to Amazon, allowing the US internet retailer to control its entire operation for a modest revenue stream.

Alan Giles, HMV’s chief executive who is to step down in December, on Tuesday admitted the retailer had failed to anticipate the growth of online sales when it agreed to Amazon’s terms in 2001.

HMV plans to launch its own online service for Waterstones, “which will reflect better the brand’s specialist bookselling credentials,” the company said.

Nick Gladding, an analyst at Veridict Research, said: “Sending customers that clicked on Waterstone’s to Amazon was plainly self-defeating.”

He predicted that other Amazon customers might also re-think their deals.

Borders, which has annual worldwide sales of $4.03bn, operates an agreement with Amazon similar to HMV’s. The bookstore renewed its agreement with the internet retailer in 2003. The deal is a “satisfactory agreement for us”, Borders said on Tuesday.

However, Barnes & Noble, the largest US bookseller, has preferred to develop its own online site and last year recorded online sales of $439m, 8.6 per cent of its total sales of $5.1bn.

Christopher Gower, an analyst at Mann Securities, said: “HMV is a bit late to the party.”

The music and books retailer’s sales are on a steady decline amid competition from music downloading, supermarkets and sales of CDs, DVDs and games through online retailers like Amazon.

HMV said on Tuesday that like-for-like sales were down 11.4 per cent in Britain and Ireland during the first four months of the calendar year. Waterstone’s sales were down 5.6 per cent for the period, while group like-for-like sales were down 5.8 per cent.

Mr Giles announced his resignation in January after accepting the group lacked a competitive digital strategy.

HMV has been the target of a number of private equity-backed attempts to buy the group or break it up.

The split with Amazon comes after Tim Waterstone criticised the deal during his recent failed attempt to buy back the bookstores he founded.

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