Gear4Music posts 2nd profit warning despite sales uptick

Gear4Music profit warning
// Gear4Music issues second profit warning for the second time this year
// Share prices plunged 16% in response
// It still enjoyed full-year sales growth

Gear4Music has issued a second profit warning for the year despite an uptick in sales amid its full-year results.

For the 13 months ending March 31, the online music instrument retailer saw a 36 per cent rise in total revenues to £118.3 million.

However, it downgraded its operational profit forecast from £3.3 million to  “not less than £2 million”.

In its first profit warning in January, Gear4Music said its EBITDA would be slightly below the previous year’s level of £3.5 million.

The retailer attributed the latest profit warning to capacity problems at its York warehouse before Christmas, short-term courier cost inflation and additional distribution costs.

The second profit warning also spooked shareholders, with Gear4Music’s share price plunging 16 per cent when the market opened today.

By about 9am, Gear4Music’s shares had recovered most of their early drop but were still trading down five per cent at 204p.

Gear4Music insisted it was confident it is in a good position to overcome its problems and that the “growth-related factors” will not continue into the new financial year.

It added that its “long-term strategy remains firmly on track”.

“The group has sustained very strong revenue growth over a number of years and further enhancing our systems and processes to support our future growth will be a key focus of FY20,” the online retailer said.

“After careful consideration, in the short term we are now planning to alleviate peak trading capacity constraints by improving efficiency of our distribution and logistics management systems.”

Click here to sign up to Retail Gazette‘s free daily email newsletter