Gear4music has scaled back its sales and profit expectations for its current financial year in the light of the continuing cost-of-living crisis – and uncertainty as to when consumer confidence might return.
The musical instrument and equipment pureplay says that while it had already expected inflation to affect its profitability in the current year, it was now rethinking its full-year expectations for a second time this year. Although sales grew in the first quarter of its year, despite the “weaker consumer environment”, July and August sales had been further held back by the cost-of-living crisis and heatwaves in Europe.
Gear4music chief executive Andrew Wass says today : “We expected to return to a more normalised seasonal trading pattern during FY23 with less demand during summer months than winter months, and early indications are that trading has improved in September. However, given the lack of visibility over the timing of any improvement in consumer sentiment and wider macroeconomic conditions as we approach H2, we believe it is now prudent to moderate our full year expectations accordingly.”
Revenues are now expected to reach £155m in the year to March 31 2023, while earnings before interest, taxes and asset write downs (EBITDA) to come to £9m. That’s lower than market expectations, which Gear4music puts at a consenus of £163.9m in revenues, and EBITDA of £11.9m. But it’s also ahead of its last financial year, to March 2022, when it reported revenues of £147.6m, and pre-tax profits of £5m. Both were lower than the previous year, when the retailer benefited from strong sales during the Covid-19 pandemic lockdowns when shoppers both bought online and took up musical instruments.
Wass says the retail group will focus on profitable growth as a first priority, and that its growth orientated projects – such as its move into audiovisual equipment via the relaunched AV.com and its investment in new European hubs – are making “good progress”.
“We remain well funded and profitable and the board retains its confidence in our medium and longer-term profitable growth strategy,” says Wass.
Gear4music is ranked Top150 in RXUK Top500 research.
