- FY 2026 expectations ‘uplifted’
- Net debt further reduced
- More favourable competitive backdrop
Shares in Gear4music (G4M:AIM) rallied 13.5% to a two-year high of 210p after the online musical instrument retailer flagged a strengthening sales trajectory and gross margin gains in the new financial year-to-date, giving management the confidence to upgrade full-year 2026 expectations.
The upgrade follows a year of revenue growth and welcome debt reduction from the web-based guitar-to-drum seller, which is already benefiting from the demise of two competitors, and proved music to the ears of investors who followed our recent advice to tune into Gear4music’s exciting recovery potential.
OFF TO A FLYER
Results for the year ended 31 March 2025 revealed a 2% rise in revenue to £146.7 million, with sales growth improving to 4% in the second half as York-headquartered Gear4music returned to growth despite testing market conditions.
Pre-tax profit rocketed 166% higher to £1.6 million and Gear4music delivered a further reduction in net debt to £6.4 million, down from £7.3 million a year earlier, meaning leverage has fallen to 0.6 times versus 2.1 times three years ago.
Benefiting from a relaunched growth strategy and a more favourable competitive backdrop, Gear4music reported a strong start to the new financial year with a further strengthening in sales momentum.
As executive chair Andrew Wass explained: ‘On 16 April 2025, we reported a return to double-digit sales growth from mid-March onwards, and we are pleased to confirm that since then, both sales momentum and gross margins have continued to increase.’
Wass added: ‘This encouraging performance reflects the early positive impact of our revised strategy, alongside a more favourable competitive landscape following the recent failure of two UK competitors. As previously reported the group subsequently acquired selected assets from their administrators, further strengthening our market position.’
SCOPE FOR FURTHER UPGRADES
‘With trading momentum having increased further since April, guidance is being lifted,’ noted Singer Capital Markets’ retail guru Matthew McEachran, who has a 275p price target on the stock.
‘We have raised our EBITDA (earnings before interest, tax, depreciation and amortisation) forecast by £400,000 to £11.4 million, equating to a 15% EPS (earnings per share) upgrade and 80% year-on-year growth. We have introduced a full-year 2027 forecast which assumes 24% EPS growth after factoring in only a fraction of the profit potential resulting from changes to the competitive backdrop.’
Progressive Equity Research’s David Jeary said: ‘Given management’s greater expectations for full-year 2026 after a strong first quarter, we have made increases to our full-year 2026 forecasts, with sales of £155.5 million, EBITDA of £11.2 million and pre-tax profit of £2.74 million,’ the latter representing an upgrade of 10%.
‘Our new forecasts stand above previous full-year 2026 consensus forecasts of £153.8 million, £10.9 million and £2.65 million, respectively.’
