Gear4music warns on profits, cites weaker consumer demand

Gear4music warned on full-year profits on Thursday as it pointed to weaker consumer demand.

In an update for the 12 months to the end of March, the company said revenues and profits in February and March were impacted by weaker consumer demand. As a result, it now expects earnings before interest, tax, depreciation and amortisation of between £7.3m and £7.7m, down from £11m in FY22 and £7.8m in FY20.

Meanwhile, the gross margin is expected to be 25.7%, reflecting a "significant" reduction in inventory levels through a challenging period for discretionary retail. It was 27.8% in FY22 and 25.9% in FY20.

Chief executive Andrew Wass said: "Whilst challenging economic conditions meant we were not able to grow revenues and profits as intended during FY23, we are pleased to have made good progress with our objective of significantly reducing the group's net debt position, from £24.2m a year ago, to £14.5m as at 31 March 2023.

"The further investment into our European distribution infrastructure during FY22 underpinned our progress in Europe during FY23, although high rates of inflation continue to squeeze consumer spending on discretionary items across all of our markets. In the UK, as previously announced, courier disruption impacted trading during our busiest period."

Still, the company said it was confident of a return to more profitable growth in FY24.

At 0820 BST, the shares were down 15% at 75.00p.

Gear4music is the largest UK-based online retailer of musical instruments and music equipment.