HMV is in talks with banks over its future following worse-than-expected trading in the runup to Christmas, the new chief executive of the entertainment group says.

Trevor Moore, who joined HMV from the camera chain Jessops, said current market conditions suggested the group would not meet expectations for the year to April. As a result, the terms of its bank loans were not likely to be met in January and April, placing the future of the 238-strong chain under threat.

HMV said like-for-like sales fell 10.2% in the 26 weeks to 27 October as its pre-tax loss narrowed to £36.1m, compared with £50.1m the previous year. The dismal results come despite reports that HMV has received £40m in financial support from its suppliers in a bid to keep it going over the festive period.

HMV shares crashed more than 40% in early trading on Thursday morning, to just 2.375p, giving the retailer a market value of just £10m.

Suppliers including Universal Music came to HMV's rescue last January with a deal that helped the retailer shed some of its huge debt.

Both music publishers and film studios are keen to see the struggling business survive as internet retailers such as Amazon chip away at their profit margins.

It is understood HMV has secured improved access to music and film suppliers' back catalogues and is buying stock on consignment, meaning it only pays for products if it sells them.

Its struggle has seen it sell off several parts of its business, including the Waterstones book retailer, to reduce its debt, while closing loss-making stores. It recently offloaded its Hammersmith Apollo venue for £32m, enabling it to negotiate a new deal with lenders.

It said on Thursday that sales in the first half of the year were hit by the light release schedule, as suppliers held back on significant product launches due to the Olympics.

The group said it managed to boost its share of the declining market by doing more promotional offers such as "2 for £15" on CDs or "5 for £30" on Blu-Ray discs. At the end of the period, the business had a 38% share of the physical music market and a 27% share of that for the physical visual – DVD and Blu-Ray.

Moore said closing more stores or placing the business into administration was not "part of our plan".

"It's been a tough first half but we've reduced losses and in a difficult market we've continued to grow share."

In May, when Simon Fox was still in charge, the group said it was looking for pre-tax profits of at least £10m for the 2012-13 financial year.

Freddie George, an analyst at Seymour Pierce, said he was unconvinced that measures taken by the group were enough to "offset the structural pressures on its core business of music, vision and gaming".

Maintaining his sell recommendation on HMV shares, George said: "We continue to see HMV as a value trap with potentially insurmountable structural issues."