Lockdown is music to the ears of investors who bought into instrument retailer
WHILE bookworms curl up with the latest bestseller to fend off lockdown ennui, music enthusiasts have been letting their hair down by strumming strings, hitting keys and recording new tunes.
Online retailer Gear4Music has been a key beneficiary of the trend. Customer numbers rose 23 per cent to more than 950,000 in the six months to September 30, while sales and profits soared, as guitars, keyboards and home recording equipment flew off the shelves.
The figures, released last month, sent brokers scuttling to upgrade their full-year forecasts for the business.
Turnover is now expected to increase by 20 per cent to £145 million with profits more than doubling from £3.3 million to £8.5 million.
Gear4Music’s performance is particularly welcome, as it follows a difficult period for the business.
Midas first recommended the shares to investors in July 2015 when they were £1.39.
It tipped them again in October 2018, when they were £5.52. The following January, chief executive Andrew Wass was forced to issue a profit warning, as his firm struggled to cope with orders and distribution.
Sales were strong. But logistics were not. The share price plunged to below £2 and stayed at that level until early this year.
Behind t he s cenes however, Wass and his team were working hard to fix their problems and ensure Gear4Music could cope with demand.
Their efforts have paid off handsomely and the shares have responded, soaring to £7.00 during the pandemic.
Wary investors may worry that Gear4Music’s good fortune could wane, as life returns to normal. But anecdotal evidence suggests that, once the music bug hits, it can be hard to shake off.
Encouragingly too, Gear4Music sales have rocketed, even though several areas of the business have experienced lower growth than previously.
Orchestral instruments, such as violins or cellos, proving l ess popular this year, for obvious reasons, while sales of live music equipment – lights, PA systems and such like – have fallen almost 20 per cent. These divisions should bounce back and the company is pursuing several new ideas that should support long-term growth.
Continental Europe offers plenty of opportunities as well. Wass has already set up hubs in Sweden and Germany, there are websites in several European languages and sales are growing fast on the Continent.
Even so, the group still has just 2 per cent of the market in mainland Europe so there is clearly room for improvement.
Ticker: G4M Traded on: AIM Contact: gear4musicplc.com or 0330 365 4444