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Gear4Music: focused on international growth

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Gear4Music invested more than £1m in its ecommerce platform in the first-half
Gear4Music invested more than £1m in its ecommerce platform in the first-half
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Gear4Music: focused on international growth

Gear4Music continued to focus on laying the groundwork for international expansion in the first half of its financial year. Sales rose by more than a third (36%) with international sales up by 39% – but the musical equipment retailer moved into the red at the bottom line. That was partly as a result of delays building up stock in its European distribution centres, and partly since “in common with many retailers, August represents a low point in the annual cash cycle.”

 

The retailer today reported revenue of £42.5m in the six months to August 31 - up by 36% on same time last year. But profitability declined, with earnings before interest, tax and asset write downs coming in at £652m, down from £717m last time. At the bottom line, the business reported a loss of £362m, down from profits of £4m a year earlier.

 

Chief executive Andrew Wass said the business had seen strong growth in revenues in the UK and in its international markets. “As the market for musical instruments and music equipment continues to transform and consolidate, we have strengthened our position as the UK’s leading retailer within the market, having invested into our customer proposition, market-leading ecommerce platform and scalable infrastructure.”

 

He said revenues had grown strongly since September 1 and that the retailer was now confident of seeing revenues grow strongly and earnings improve in line with full-year expectations.

 

York-based Gear4Music is a Top250 retailer in IRUK Top500 research. It sells to 190 countries online and has showrooms in York, Sweden and Germany.

 

Operations and logistics

Gear4Music aims to be a leading global retailer in its space and has opened distribution centres in Sweden and Germany. It is now moving to a larger Swedish distribution centre since space limitations there have played a part in delays in building up stock in its European centres. International revenues £18.5m were 39% ahead of last time.

 

It has started to source goods locally, buying in both Euros and Swedish krona, but still buys most of its branded products in UK pounds.

 

Mobile

More than half (58%) of visitors to Gear4Music websites came via mobile in the first half of the year – up from 53% a year earlier. The retailer says it continues to focus on developing its mobile website.

 

The Customer

The customer proposition and customer service are a focus for investment. Gear4Music’s Trustpilot score stands at 9.5, from more than 40,000 reviews.

 

Own-brand

Gear4Music now sells 3,200 own-brand products, from musical instruments to equipment, a range to which lighting and audio products have now been added.

 

Ecommerce platform

The retailer invested £1.1m in its platform, with key projects including an upgrade to competitor price tracking, a website refresh, upgrades to its warehouse and distribution and selling via Amazon Seller Fulfilled Prime.

 

The analyst view

Paul Hickman, analyst at Edison Investment Research, said the retailer had battled competition in the first half of its year and is starting to reap the benefits in the second, Christmas, half of the year.

 

“As a result management is sticking to its full-year EBITDA guidance – the market is expecting 41% growth to £4.9m. It is notable that unlike reports from other retailers, there are no references to climatic conditions in its first-half results, whether hot or cold.

 

“Web statistics show an impressive 41% growth in the number of visitors to its 20 national websites (55% ex UK), combined with a significant 38 point rise in the conversion rate to 2.84% to 3.22%.

 

“International expansion is where strategy is focused, where as yet international revenue of £18.5m still lags UK revenue of £24.0m. It is growing at a faster 39% against 34%, and that rate should increase following relocation to a larger distribution centre in Sweden.”

 

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