Online retailer share price crashes after scaling back expectations

Online musical equipment retailer, Gear4music, has seen its share price drop 25% at opening after reporting its results will be below market expectations in a year-end trading update for the 12 months to 31 March 2022.

This is despite what it describes as a “strong financial and operational progress compared to pre-Covid trading”.

The York-based business which saw  a strong financial year throughout the pandemic in 2020 where sales increased by 31%, saw total sales for FY22 drop 6% to  £147.6m, but noted that against its pre-pandemic results this  represented growth of almost a quarter.

The company, which last year completed the £9m acquisition of a Lancashire-based home cinema retailer and issued a profit warning in November, now expects EBITDA to be £11m (FY21: £19.8m; FY20: £7.8m).

Following the news, the company’s share price fell to 270p per share, returning it to its pre-pandemic value and marking a drop of over 70% from its June 2021 peak of 1010p per share.

Gear4music says its revenues and EBITDA are slightly lower than market expectations, due to weaker than expected consumer demand during February and March 2022.

Chief executive officer, Andrew Wass, noted that the company’s  “FY22 financial performance has been impacted by weaker consumer demand during February and March”, but that it “retained a significant proportion of the exceptional gross margins that benefited from Covid lockdowns during FY21”.

Wass added: “We also achieved a 41% improvement in EBITDA compared with FY20 despite the impact of Brexit. This clearly demonstrates our long-term strategy, focusing on profitable growth, is on track and working well.

 “We look forward to building on these accomplishments during FY23, supported by a pipeline of new growth orientated initiatives, e-commerce platform upgrades, and our recently launched website.”