Retailer issues profit warning despite big jump in Christmas sales

Music retailer Gear4Music has issued a profit warning after reaching capacity at its York distribution centre during the Christmas period.

The listed business said it “reached maximum capacity” during the peak trading period between Black Friday and Christmas.

It now expects its full-year earnings to be “slightly below” last year’s level of £3.46m – which were already 4% lower than the previous year.

This is partly because constraints on capacity also capped its ability to improve its margins, although they were better than in the first half of its financial year. Sales in the final four months of 2018 were up 41%, to £48.7m, although the company did not share figures on profitability.

Gear4Music’s chief executive Andrew Wass said: “We are pleased to have delivered strong sales growth of 41% over the last four months, building on the 36% sales growth achieved in the first half of the year.

“In addition, our strategic initiative to expand in to Europe has shown further good momentum, with sales growth of 47% in the period, an increase from 39% at the half year.”

Gear4Music is “already working on plans to further expand our UK distribution capacity” and Wass believes this will be in place by autumn.

It has also completed the relocation of its Swedish operation, and the firm said it now has “significant capacity headroom” at both European locations, supporting the strong consumer demand it is experiencing.

“We expect this high consumer demand and strong sales momentum to continue over the remaining three months of the financial period and into the next financial year,” added Wass.