StockMarketWire.com - Musical retailer Gear4music reported Friday it expected earnings this year to come in lower than that of last year as distribution capacity constraints in the UK stifled sales growth.

Further sales growth in excess of expectations was 'constrained by our York distribution centre, which reached maximum capacity during the peak trading period between Black Friday and Christmas,' the company said.

'These capacity constraints prevented further sales growth compensating for the lower gross margins and, as a result, the Board now expects FY19 EBITDA (earnings) to be slightly below FY18 levels, the company added.

For the four months from 1 September 2018 to 31 December 2018, total sales jumped 41% to £47.7m as active customer numbers rose by 47% to 666,000.

The expansion in to Europe had shown further good momentum, with sales growth of 47% recorded in the four-month period, an increase from 39% at the half year.

The company said it was working on plans to further expand its UK distribution capacity ahead of the peak trading period next year and was confident that this could be achieved by Autumn 2019.

'Our focus has been on gaining market share in what has been a highly competitive environment, and in support of this target and following a period of planned investment, margins during the Period began to return towards historical levels. We are confident of further improvements as we progress through FY20,' said Gear4music's Chief Executive Officer, Andrew Wass.

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