Shares in HMV dived by 13 per cent after the high street retailer gave warning that profits would be £10 million lower than expected, as it revealed details of a three-year turnaround programme.

The company, which also owns the Waterstone's bookstore chain, also said that it was considering selling off its Japanese business as part of plans to revitalise the overall business, which it conceded has "not adapted quickly enough to the way customers are now buying and consuming media".

Full-year profits are expected to be about £50 million, compared with a previous market consensus of £60 million, making it the second profits warning HMV has issued in three months.

HMV said that trading conditions had deteriorated further since its interim results in January, specifically at its overseas markets and at Waterstone's.

Shares in the company fell 19.75p to 133p in early trading.

The company said that the planned improvements to gross margins and cost savings outlined in January had not been delivered.

Simon Fox, the chief executive of HMV, who joined the company last September, said that it had made changes to the management, including the departure of its products director, and performance would improve but not until the new financial year.

In the final months of the current financial year, which will end on April 29, Sony will launch its PlayStation 3 console in Europe.

But HMV said that it was taking a cautious approach to the year and "now expects full-year profits to be below the current range of market expecations".

HMV is planning to close about 30 of its 330 Waterstone's stores, including some sites where there is duplication from the company's acquisition last year of the bookseller Ottakar's.

Other closures will include university campus sites and other underperforming outlets.

Like-for-like sales at Waterstone's for the nine weeks to March 10, 2007, fell by 6.1 per cent, while in Asia, which spans 65 shops in Japan, Hong Kong and Singapore, revenues fell by 7.2 per cent.

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