- Gear4music warned on profits as product margins took a hit from increased costs and rising competition offsetting a 36% jump in sales for the 13 months through March 2019.

The company said it now expected earnings (EBITDA) to be not less than £2m, as a result of a combination of the additional distribution costs, some short-term courier cost inflation and a clean-up of overstocked and slower moving inventory in recent months.

Product margins during a highly competitive period had been the largest contributing factor to the lower profitability, the company said.

This comes despite ongoing momentum in sales growth both in the UK and Europe,

UK sales increased 33% to £63.6m and Europe and Rest of World Sales increased 41% to £54.7m, taking total sales to £118.3m, up 36% on last year.

Active customer numbers increased by 53% to 727,400 and website conversion improved to 3.40%, up from 3.25% last financial year.

'As previously reported, during the period the Group was impacted by lower gross margins than has historically been the case,' the company 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.'

Net debt at the period-end was expected to be below the board's previous expectations with adequate headroom against our asset-backed banking facilities supporting the funding requirements of the business, the company said.

At 8:19am: (LON:G4M) Gear4music Holdings Plc share price was -27.5p at 187.5p

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