Gear4music says its full-year sales and earnings are set to fall slightly short of market expectations as consumer confidence and international sales weaken. The business has previously said its sales were affected by Brexit-related challenges in 2021, a year in which the new Trade and Cooperation Agreement between the UK and the European Union introduced new bureaucracy including customs checks.
Today Gear4music said in a full-year trading update that it expected sales to come in at £147.6m in the year to March 31 2022 – 6% down on last year, but 23% ahead of two years ago. While UK sales have continued to grow at a slower pace than during the pandemic, its sales in Europe are almost a fifth lower than the previous year.
In the UK, full-year sales stand at £82.6m – 5% higher than the previous year, and 34% ahead of two years ago. Sales in Europe and the rest of the world are expected to come in at £65m – 18% lower than the year before but 11% higher than in 2020. Earnings before interest, tax and asset writedowns (EBITDA) are expected to come in at £11m – down from £19.8m last year but ahead of the £7.8m it reported in 2020.
The pureplay musical instrument and equipment retailer pointed to strong progress compared to before the Covid-19 pandemic but said that weaker than expected demand in February and March 2022 as a result of inflation and falling consumer confidence meant that full-year sales were slightly behind market expectations of £149.2m revenues and £12m EBITDA.
Looking ahead, Gear4music says it now has strong levels of inventory across its distribution centres – including in Europe – that should support sales in its current full year. It is also looking to sales from its new specialist audiovisual equipment business AV.com, and will invest in ecommerce platform upgrades.
Gear4music chief executive Andrew Wass, says: “Short term inflation-linked overhead cost pressures and weaker consumer confidence across the broader retail landscape will mean the best opportunities for stronger growth during FY23 are likely to be in H2. We are, accordingly, moderating our overall growth expectations for the new financial year, which we believe is the prudent approach in the current environment. During what may be a more challenging FY23 H1 retail environment, sales and margins will be supported with good levels of inventory across our distribution centres, continuing expansion of our European operations to drive European website conversion, and sufficient working capital to continue investing where appropriate.
“We believe we have the right operating structure to continue accelerating our market share gains and remain confident in our medium and long-term profitable growth strategy. We look forward to providing further details of our progress when we publish our full FY22 results in June.”
Gear4music, ranked Top150 in RXUK Top500 research, is based in York and sells online and through showrooms and distribution centres in York, Sweden and Germany. It has recently added new distribution centres in Ireland and Spain to support its sales to Europe.
