Gear4Music today said its strategy of focusing on profitable sales was paying off as it pointed to a half-year rise in sales and profits.
The musical instruments and equipment pureplay says it has turned around a situation that last year saw it selling more goods for less profit last year as its warehouse reached full capacity during the all-important peak trading period ahead of Christmas. That meant higher costs, and the it was unable to sell enough goods to achieve the scale that it needed in order to be more profitable. Both labour and distribution costs were higher than expected. Since then, Gear4Music said today, it has strengthened its warehousing and infrastructure while also focusing on higher margin sales.
Today the retailer, ranked Top250 in IRUK Top500 research, said gross profits would come in at £12.4m in the six months to September 30, up by 29% on the same time last year, on total sales of £49.4m, 16% up on last time. UK sales were 3% ahead at £24.8m, while European and rest of the world sales were 33% ahead at £24.6m.
Gear4Music chief executive Andrew Wass said the retailer had achieved its main aim of improving its gross profit margins. “By cutting out less profitable sales and focusing on higher margin products, we have delivered an FY20 H1 gross margin of 25.2% and a 29% increase in gross profits," he said. "We have restored our gross margins to FY18 levels whilst at the same time continuing to grow our revenues and taking market share.
“International sales growth continues to be strong, and whilst the UK market remains highly competitive, we have returned to a more profitable margin structure and believe that this is the right strategy from which to grow our revenues going forward.
“Our warehousing and infrastructure teams have worked tirelessly during the year to ensure we have a robust logistics operation in place ahead of our peak FY20 H2 trading period, and we are confident that we now have the capacity and efficiency required to make the most of the opportunities available to us.
“Our re-focused growth strategy is now in place and we are confident that the business is effectively configured to achieve a sustainable level of profitable growth. As such, we continue to trade in line with our full year EBITDA expectations as we head towards our seasonal peak."
York-based Gear4Music sells branded musical instruments and equipment online to more than 190 countries, with showrooms and distribution centres in York, Sweden and Germany.
Image: Screenshot of Gear4music.com/InternetRetailing Media