Online retailer stock price tumbles after lowering expectations

Online music equipment retailer Gear4music saw its share price drop 25% at the open after announcing that its results would fall below market expectations in a year-end trade update for the 12 months to March 31, 2022 despite what it describes as a “sstrong financial and operational progress compared to pre-Covid trading”.

The York-based company, which had a strong financial year throughout the pandemic in 2020, where sales increased by 31%, saw its total sales for FY22 fall by 6% to £147.6million, but noted that compared to its pre-pandemic results this represented a growth of nearly a quarter.

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

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

Gear4music says its rRevenues and EBITDA are slightly below market expectations, due to weaker than expected consumer demand in February and March 2022.

Chief Executive Andrew Wass noted that the company “FY22 financial performance was impacted by weaker consumer demand in February and March,” but that it “retained a significant portion of the exceptional gross margins that benefited from the Covid lockdowns during the exercise 21″.

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

We look forward to building on these achievements in FY23, supported by a pipeline of new growth-oriented initiatives, e-commerce platform upgrades and our recently launched website.