- Profit warning sees 5% and 24% cut to sales and profit
- Cost of living crisis and hot weather to blame
- Focus remains on profitable growth
Online musical instrument retailer Gear4music (G4M:AIM) issued a profit warning on Friday, sending the shares down 12% to a new five year low of 116.9p. Over the last year the shares have dropped 88%.
In a trading statement ahead of its annual general meeting the company said trading in July and August had been impacted by the cost of living crisis as well as the unusually hot weather.
Despite achieving sales growth in its fiscal first quarter through June, management believes it is prudent to reset expectations for the full year.
RESETTING EXPECTATIONS
The company now anticipates delivering sales of £155 million and EBITDA (earnings before interest, taxes, amortisation, and depreciation) of £9 million, 5.5% and 24% below market expectations respectively.
If the new numbers are achieved, it would represent 5% year-on-year sales growth and a 20% drop in EBITDA.
Perhaps the profit warning wasn’t such a surprise. Before today’s reset full-year consensus earnings estimates had halved since the beginning of the year according to Refinitiv data.
The pressure is now on to deliver a successful campaign over the seasonally busy festive season. Getting the right amount of stock in place will be key.
The company said its pipeline of growth-oriented projects continues to make good progress. It is seeing ‘strong’ results from last year’s investment into new European hubs.
CONFIDENT OUTLOOK
CEO Andrew Wass commented: ‘In line with our stated strategy the group will continue to focus on delivering profitable growth as its first priority.
‘We remain well funded and profitable and the Board retains its confidence in our medium and longer-term profitable growth strategy.’
A more detailed analysis will be announced on 20 October covering the six-month trading period ending 30 September.
READ MORE ABOUT GEAR4MUSIC
