Gear4music today reports strong sales and profit growth after a year in which record orders came amid operational challenges from Covid-19 and Brexit.
Sales grew by 32% and pre-tax profits by 375% as demand surged during lockdowns, and as the retailer reacted quickly to Covid-19 and prepared for Brexit.
The retailer, ranked Top350 in RXUK Top500 research, says it had to restrain marketing spending in the first quarter of its financial year in order to ensure its logistics operation stayed safe while dealing with heightened demand in the first Covid-19 lockdown. Demand remained strong through the second and third quarters, while the retailer also focused on Brexit preparations, enabling it to continue to trade strongly in the fourth quarter despite the new UK-EU customs border.
Now that post-Brexit arrangements are fully in place, the retailer plans to open two new logistics hubs in Europe in the second half of its current financial year, adding to existing hubs in Sweden and Germany. One will be in Dublin, serving both the Republic of Ireland and Northern Ireland, and the other in Barcelona, cutting delivery times to southern Europe as the retailer looks to Europe and the rest of the world for future growth.
The retailer says guitars and digital keyboards and pianos sold particularly well during the year, with customers often opting for its own-brand beginner and intermediate products. It bought two new brands during the year – drums and percussion brand Premier and bass guitar amp brand Eden and says it may make more acquisitions with funding now available through a new £35m bank facility.
During the year it also developed its own bespoke ecommerce platform, with its 67-strong development team making 1,396 updates, with new features including digital software downloads, Apple Pay integration and new warehouse management and dispatch tools as order volumes increased.
The retailer today reported revenues of £157.5m in the year to March 31
. That’s 31% up from £120.3m in the previous year. Revenues were almost equally split between the UK (+27% to £78.7m) and international sales (+35% to £78.8m). Sales grew more strongly in the first half (+42%) than the second (+23%). Pre-tax profits of £14.7m were up by 375% on the previous year, when it reported pre-tax profits of £3.1m.
Andrew Wass, chief executive of Gear4music, says the 2021 financial year “has been a transformational year for the group during which we have delivered an exceptional financial performance whilst rising to the unprecedented operational challenges presented by Covid-19 and Brexit.
He says the retailer had seen “exceptional” trading during the year, particularly in the first Covid-19 lockdown as more people wanted to buy music equipment and customers could only buy online, with traditional high street retailers closed in lockdowns. That drove profitability to a level that it does not expect to be repeated in the current year.
But, adds Wass: “The outlook and general demand for musical instruments and equipment remains positive and with the strategies and action we are taking, we remain confident of delivering sustainable and profitable growth in the long-term.”
Gear4music says trading in April and May 2021 was ahead of the board’s expectations. However in its current full year it does not expect profitability to be as high as in its latest financial year. That said, Gear4music chairman Ken Ford says: “We believe that the competitive retail landscape in musical instruments and equipment will look different post Covid-19 as physical store operators struggle with the well-reported accelerated channel shift to online.”
Active customers grew by 32% to 1.06m during the year while website visitor numbers grew by 27% to 36m, and the online conversion rate improved by 40bps to 3.69% from 3.29% previously. The retailer now lists 7% more products, at 57,900 and average order values declined slightly from £117 to £116.
Gear4music is based in York. It sells own-brand musical instruments and equipment alongside third-party brands including Fender, Yamaha and Roland to 190 countries and through showrooms and distribution centres in Sweden and Germany.