Gear4Music today showed how it benefitted from “exceptionally high levels of demand” during the Covid-19 lockdown, having returned its business to profitability in its latest financial year.
The musical instruments and equipment pureplay, a Top250 retailer in RXUK Top500 research, said that it experienced very little disruption to its order processing during the lockdown as those who could do so started to work remotely, and social distancing was introduced in its warehouses. Two weeks of those high levels of lockdown demand are included in its full-year results – but, says the retailer, that level of demand has continued ever since.
“Covid-19 has brought significant changes to the retail market for musical instruments and equipment, with an accelerated shift away from physical store sales towards online,” said chairman Ken Ford. “As a result Gear4music has seen an exceptional and sustained increase in demand for its products over the first quarter to date.”
The retailer reported sales of £120.3m in the 12 months to March 31, up by 2% on the same time last year. UK sales fell slightly to £61.8m from £63.7m a year earlier, while international sales grew to £58.5m from £54.5m last time. The York-based retailer delivers to 190 countries from distribution centres in the UK, Germany and Sweden.
Pre-tax profits came to £3.1m for the year, from last time’s pre-tax loss of £0.8m - as restated under new IFRS16 accounting regulations. Profitability grew as the retailer boosted its profit margins to 30.5% from 27.8% a year earlier, and cut delivery costs to 7.3% of sales from 7.7% a year earlier, while also concentrating on improvements to its backend operations.
Andrew Wass, chief executive of Gear4Music, said the retailer had successfully returned to “a more profitable growth trajectory”, with profits that were ahead of the board’s expectations. Demand, however, took off during lockdown. “With an increasing number of people throughout the Covid-19 lockdown recognising the benefits that playing, creating and recording music can bring, we have seen a significant increase in demand during this exceptional period. Positive sales trends with improved margins have continued into June, and we have also incurred lower marketing costs than we would typically expect.
“The improvements we have made during FY20, and the exceptionally strong trading we have experienced during the lockdown period, mean we are financially stronger and better placed than ever to make the most of future growth opportunities within our market. Therefore, whilst still early in the current financial year, the board is confident of continued financial improvements during FY21 and look forward to the year ahead with optimism."
Looking ahead, the retailer now plans to grow its share of the market. Having invested in upgrading its backend systems and infrastructure during its last full year, the current year will see investment in customer experience and in its ecommerce plaform, with a focus on improving its mobile website and customer communication and personalisation. Longer-term the retailer plans on introducing new ways to buy products on Gear4Music, starting in the current year with digital downloads of products such as music software and sample libraries.
It warned, however that while it was well placed to navigate changes that emerge as a result of Brexit, its revenue growth may be constrained during future periods of change in the UK’s trading relationship with Europe.
Wass concluded: “With the shift from high street to online consumer shopping continuing to accelerate, we remain confident that our business is appropriately configures to achieve long-term profitable growth, and that we are in a strong position to build upon the excellent progress we have made during 2020.”