Music retailer Gear4Music reduces team by 20% in cost savings moves

Yorkshire online music retailer Gear4Music has reduced its team by 20% in the face of a “challenging market”, its latest trading update shows.

The company is the largest UK based online retailer of musical instruments and music equipment, serving customers in more than 190 countries through a number of websites and from its distribution centres in York, Bacup, Sweden, Germany, Ireland and Spain, as well as showrooms in York, Bacup, Sweden and Germany. Gear4Music, which has its head office in York, has published a trading update for the six months to the end of September showing a 6% drop in revenues to an expected £62.6m, despite seeing growth in the UK. Sales rose 3% in the UK but dropped by 15% in Europe and the rest of the world.

It said gross profit is expected to be £17m, down from £17.4m in the comparable period last year. Meanwhile, net debt was reduced by £3.7m to £18.1m, reflecting the normal seasonal build of inventory ahead of its peak period. The group, which sells own-brand musical instruments and equipment alongside premium third-party brands including Fender, Yamaha and Roland, said the revenues reflect its previously announced focus on prioritising gross margins ahead of sales growth, in what continues to be a challenging market.

It has also been carrying out cost saving initiatives, making £4m of annualised cash savings implemented during the period, including reducing its team size by 20% compared with September 2022.. A spokesman for the company said 40 redundancies had been made since last September. Annual accounts published for the company earlier this month show that, as of March 2023, it had 573 staff, resulting in a wages and salaries bill of £11.84m.

The stock market announcement tells how Gear4Music has made a £2.5m reduction in software development team annual salaries, £1m reduction in other annual wages and salaries, a one-off non-recurring cost of £500,000 and a £500,000m annualised reduction in other administrative expenses.

Looking ahead, the firm said its is well prepared for its peak seasonal trading period and that UK revenues continue to be stronger than European revenues, with the second-hand market continuing to perform well. The full-year outlook for the year ending March 31 2024 remains in-line with market expectations, of revenue of £161.7m, Ebitda of £9.8m and pre-tax profit of £1.2m.

Gear4music’s chief executive officer, Andrew Wass, said: “We have continued to make good progress with our strategic objectives in what we anticipated would be challenging market conditions. We are pleased to have achieved growth in the UK, whilst our European markets have been impacted by lower consumer demand.

“Mindful of the current trading environment, we have retained our pricing discipline and focused on improving gross margins. In addition, we have taken decisive action to drive further efficiencies and ensure our cost base is appropriately configured to deliver our profitable growth strategy.

“As we look to leverage the potential of AI driven technologies and further reconfigure the business into a lower cost operation, we will continue to invest into future growth projects such as our second-hand system, ensuring the Group is well positioned to quickly and profitably scale further as economic conditions improve.”

“The group will report Interim results for the six months ended September 30 on November 14.

Original artice – https://business-live.co.uk/all-about/yorkshire-humber

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