Shares of York-based Gear4music, the largest UK online retailer of musical equipment, rose about 13% on Wednesday after the firm announced a trading update for the six months to September 30, 2021.
Gear4music reported total first-half sales of £64.7 million, down 8% on the “exceptionally strong” first half of the previous year, when sales of musical equipment soared during lockdown, but up 31% on the comparable six months before the pandemic.
The firm reported “robust” UK sales but European sales were down 16% “due to post-Brexit challenges.”
Gross profit was £18.1 million (FY21 H1: £20.1m; FY20 H1: £12.5m).
Gear4music CEO Andrew Wass said: “We are pleased to report that trading during FY22 H1 has been in line with the board’s expectations which, as previously reported, was not expected to meet the same level of trading as during the exceptional FY21 H1 period that was significantly enhanced by COVID lockdowns.
“With a 280bps improvement in gross margin relative to FY20 H1, we are particularly pleased to have retained a large part of the gross margin upside achieved during FY21 H1, alongside strong two-year sales growth.
“Our previously announced new Irish and Spanish distribution centres have now become operational, which following the challenges of Brexit, we expect will positively impact our European sales during FY22 H2 by largely eliminating cross border shipments, and increasing the breadth, strength and capacity of our delivery proposition within Europe.
“The acquisition of AV Distribution Ltd, an online retailer of Home Cinema and HiFi equipment, is on track to complete by December 2021, which will significantly increase the group’s addressable market size.
“Preparatory work to integrate AV Distribution Ltd is progressing well, and we expect to launch AV.com in January 2022 following our peak Christmas trading period.
“Whilst the musical instruments and equipment market is not immune to global supply chain issues and increased shipping costs, we are well placed to continue minimising the impact of this situation, having deliberately and significantly increased on-hand stock from £23.3 million at 30 September 2020, to £30.4 million at 30 September 2021.
“As such, the board is confident that results for the full financial year will be in-line with consensus market expectations.”
Gear4music believes that current consensus market expectations for the year ending March 31, 2022, are revenue of £156.6 million, EBITDA of £14 million and profit before tax of £7.3 million.