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LONDON (Alliance News) - Gear4music Holdings PLC on Tuesday said it expects lower earnings compared to the previous year due to higher distribution costs and lower product margins.
Shares in the online musical instruments retailer were trading down 5.8% at 202.51 pence each on Tuesday morning.
For the 13 months to the end of March, the company expects earnings before interest, taxes, depreciation and amortisation to be "not less than GBP2 million". A year ago - in the 12 months to February 2018 - Gear4music's Ebitda came in at GBP3.5 million.
This decline in the recent year's earnings was due to gross margins being "lower than has historically been the case", Gear4music said. However, during the second half of the year, product margins improved to 28.6% from 27.5% in the first half, due to actions the company took, it said.
"In addition, our York distribution centre reached maximum capacity during our peak Christmas trading period which affected anticipated sales growth and also resulted in higher than expected distribution costs," the retailer added.
"However, the board is confident that having undertaken a thorough review of the business, including a strong emphasis on margin growth, the group will return to a more profitable growth trajectory during the new financial year."
Gear4music said it is "confident" that the difficulties experience at Christmas "will not recur". It now plans to improve the efficiency of its distribution and logistics management systems as well as agreeing courier cost reductions.
Meanwhile, sales in the 13 months to March-end rose 36% compared to the same period a year ago to GBP118.3 million.
This was achieved despite a backdrop of consumer uncertainty and "notwithstanding the impact of the unexpected capacity constraints during the peak Christmas trading period", the firm pointed out.
UK sales accounted for GBP63.6 million of the total, rising 33%, while Europe and Rest of the World sales jumped 41% to reach GBP54.7 million.
In the 12 months to February, sales were up 37% to GBP109.9 million.
"Gear4music revenues have grown from GBP12 million to GBP110 million in just six years, including international growth in the same period from GBP1 million to over GBP50 million, strengthening our position as the number one retailer of musical instruments and equipment in the UK and making us Europe's second largest," Gear4music said.
