Gear4music today says that cross-border shipping challenges have held back its European business in the first quarter of its financial year. The retailer, ranked Top350 in RXUK Top500 research, says revenue from its UK business returned to growth in July and August 2021 – but that slower European turnover was “impacted by post-Brexit challenges”. Now new European distribution centres in Ireland and Spain are set to open in September – and are expected to solve those challenges.
The updates came in an AGM statement, in which Andrew Wass, Gear4music chief executive says that first quarter trading was stronger than expected but still behind the “exceptional period of trading during FY21”. He adds: “UK sales have pleasingly returned to growth during July and August. European sales have remained behind last year, primarily as a result of post-Brexit cross border shipping challenges creating a less competitive delivery proposition in some of our European markets.
“Our two new distribution centres in Ireland and Spain will be operational by H2 FY22 as planned, and should eliminate most of the remaining post-Brexit challenges, significantly improving our European delivery proposition to provide a platform for further growth in our European markets by Q4 FY22.”
The retailer also said today that it has invested £9.2m in buying AV Distribution, trading as AV Online though audiovisualonline.com, and, separately, has bought the av.com domain name. It will now relaunch the home audio and visual equipment business as AV.com, with its website set to launch by the fourth quarter of this year, selling. AV Online revenues grew by 54% to £8.6m in the year to March 31, while EBITDA (earnings before interest, tax and one-off costs) reached £1.3m.
AV Online was founded in 2003 by Carl Pickles, and now operates from a 26,000 sq ft warehouse, offices and showroom in Bacup, Lancashire. It sells audiovisual equipment from home cinema systems to hi-fi systems, speakers, and other accessories, and has 21 members of staff. It also operates the hificables.co.uk website. The deal includes inventory worth £2.5m and the freehold warehouse, valued at £1.3m.
In today’s statement, Gear4music says that the acquisition will “significantly increase” the size of its potential market and that there are there are “significant synergies between the market in which Gear4music operates, and the closely related but separate AV market, which is currently dominated by high-street based retailers such as Richer Sounds”.
It adds: “The board is confident that by moving the AV Online business onto Gear4music’s highly scalable bespoke ecommerce platform, rebranding the business to AV.com, developing its product ranges, and expanding into Europe, AV.com can quickly grow its revenues and profits. The board expects that the acquisitions will be earnings per share enhancing from FY23 onwards.”