Gear4music today said it had benefited from Covid restrictions in the first half of its financial year as shoppers turned online to buy – but predicted that the added challenge of Brexit would drive consolidation in its market.
Customers, it says, have preferred to buy online during the pandemic at a time when they are discovering the benefits of playing and creating music. Allied to lower than expected marketing costs and higher than expected profit margins, this has combined to deliver “higher profitability than we would have expected to achieve under normal circumstances”.
The retailer, a Top250 retailer in RXUK Top500 research, today reported revenue of £70.2m in the six months to September 30. That’s 42% up on the same time last year and came as 403,000 new customers bought from it – 52% more than at the same time last year. Pre-tax profits of £5.75m were well ahead of the £279,000 loss reported at the same time last year.
More than half (58%) of users came via its mobile website. That’s down from 65% a year earlier, likely a Covid-19 effect. Its conversion rate rose to 3.9% from 3.02% last year, while its average order value fell to £117. Sales of its own-brand products grew by 43% to account for 28% of the products it sells.
Gear4music chief executive Andrew Wass said the retailer’s sales were increasing in response to Covid restrictions across Europe, while its profits were improving as a result of its work to make its operations more efficient and to improve its gross profit margins. That’s a turnaround from the situation In the year to March 2019 when it reported a pre-tax loss despite sales growth of 48% after its warehouse hit maximum capacity in the run-up to Christmas 2018, resulting in higher costs.
He says: “We expect the significant growth in new customers achieved during the period will benefit the group in both the medium and longer term, as more people appreciate the benefits that playing and creating music can bring.”
During the first half of the the group invested £1.4m in its ecommerce platform, including “a range of Brexit mitigation projects” including operational upgrades to its warehouses, setting up returns centres at its European hubs. More than a quarter (26%) of orders were fulfilled from its European distribution centres in the first half, a proportion that is now increasing as more local courier options are added, and stock levels are reconfigures.
And, he says: “Alongside the challenges of Covid, Brexit will also bring new challenges to our industry, and we expect this combination of events will drive further consolidation within our market. Whilst it is difficult to predict every outcome of Brexit, after several years of planning we are well prepared for the required operational changes, with our European hubs and local courier networks underpinning our revised distribution strategy.
“I am pleased to report that trading into November continues to be very strong, and we are well positioned for what we expect to be a busy peak trading period ahead of us. We therefore expect that results for the financial year will now be ahead of the recently upgraded consensus market expectations.”
York-based Gear4music sells online for delivery to more than 190 countries, and from showrooms in York, Sweden and Germany, where it also has distribution centres.