Gear4Music warns on profits despite Christmas sales growth

Gear4Music profit warning

Gear4Music has cautioned for lower earnings this year despite a spike in total sales during the crucial festive trading period.

In a trading update for the four months to December 31, the online musical instruments retailer warned 2019 earnings would be “slightly below” 2018 levels as capacity constraints in the UK held back overall sales growth.

Gear4Music reported total sales growth of 41 per cent year-on-year to £48.7 million, with UK and Rest of World sales rising 36 per cent to £25.5 million and 47 per cent to £23.2 million respectively.

The retailer said the strong uptick in sales had been driven by “significant customer demand”, but sales growth above its expectations would be held back because its distribution centre in York had reached maximum capacity during between Black Friday and Christmas.

Gear4Music chief executive Andrew Wass said the capacity issues had not “fully compensated for the lower product margins as we hoped” and that the company was working on plans to expand its UK distribution capacity.

He added that they were “confident” this could be achieved by autumn.

Wass also expected the “high consumer demand and strong sales momentum” seen in Gear4Music’s European locations to continue over the rest of the fiscal year and into the next.

“Our focus has been on gaining market share in what has been a highly competitive environment, and in support of this target and following a period of planned investment, margins during the Period began to return towards historical levels,” he said.

“We are confident of further improvements as we progress through FY20”.

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