Gear4Music today showed the effect of the post-Brexit trading agreement on its sales as it reported a 27% drop in revenue to Europe and the rest of the world in the run up to Christmas. The Trading and Cooperation Agreement between the UK and the European Union was signed at Christmas 2020 and meant that over the last year new trade barriers, in the form of added administration and customs checks, have applied to trade between the for the first time in years, and up to now have been enforced particularly on exports to Europe.
The musical instrument and equipment retailer, ranked Top350 in RXUK Top500 research, has responded to those challenges by opening and now expanding new distribution centres in Ireland and Spain, added to its existing centres in Sweden and Germany, and expects the effect on its European business will prove short term. It also points to strong sales growth within the UK.
“UK sales growth continued to be robust against what were exceptional revenues last year and, as previously reported, European growth has been restricted due to short-term Brexit related challenges,” says Gear4music chief executive Andrew Wass. “We are continuing to make good progress in scaling up our new European distribution centres in Ireland and Spain to strengthen our European customer proposition, and we expect European revenues to regain momentum as we head into FY23.”
The update came as Gear4music today reported sales of £47.2m in the three months to December 31 2021. That’s 10% down on the same time last year – when sales were pushed online through Covid-19 lockdowns and restrictions – but 17% ahead of the same time, the third quarter, of the year before.
UK sales of £26m were 13% up on last year, and 24% up on the year before. But sales of £21.2m to Europe and the rest of the world were 27% lower than the same time last year, although 9% ahead of the previous year.
Despite this, says Gear4music, profitability remained strong, with gross margins at 28.4% and gross profits 27% up on the same time two years earlier. Earnings for the current financial year are in line with market expectations – with a consensus prediction of £149.2m in revenues and earnings of £12m – and, says Wass, “we are confident in our long-term profitable growth strategy.”
Gear4music, which sells online and from showrooms in York, Sweden and Germany, says it will be launching new products, developing its ecommerce systems and adding new website features in the coming financial year. It also sells home cinema and hifi equipment via AV.com, which it launched on January 13 following its acquisition of AV Distribution in December.