Patient investors seeking a growth company trading at a discount to its recent history and offering exciting recovery potential should tune into Gear4music (G4M:AIM).
Shares in the Yorkshire-based outfit peaked above £10 in 2021 during the lockdown-induced online retail boom, when housebound consumers had time on their hands and cash to spend on hobbies, including music, but are down more than 50% over five years and flashing red over one year.
Yet having navigated supply chain disruption and weak consumer confidence, notably in its European markets, not to mention teething issues migrating to a new marketing platform, the news-flow noises from the firm have turned positive.
Gear4music has delivered a return to growth and financial risk is reducing, with the firm having further trimmed its net bank debt.
Shares believes the ecommerce play is poised to profit from the recent insolvency of two price discounters in the UK and wider European markets, with this capacity withdrawal likely to lessen the competitive pressures on the business.
DRUMMING UP BUSINESS
Gear4music’s shares have round-tripped since the company floated on AIM in 2015 at an issue price of 139p per share, but the story remains pretty compelling.
The York-headquartered company is the UK’s largest retailer of musical instruments and music equipment, selling own-brand products alongside premium third-party brands including Fender, Yamaha and Roland.
The guitar, keyboard and drum seller has extended its addressable market through acquisitions in the AV market and made a foray into trading second-hand products.
In short, Gear4music remains well-positioned to address a large and growing global music products market given its well-recognised brand and long-term relationships with major branded musical instrument and equipment manufacturers.
The £29.1 million-cap also services a broad array of customers, ranging from beginners to musical enthusiasts and professionals in the UK, Europe and the Rest of the World.
Having developed its own scalable e-commerce platform, with multilingual, multicurrency websites delivering to over 190 countries, Gear4music continues to build its overseas presence.
On 16 April 2025, Gear4music announced it had snapped up stock with a cost value of £1.8 million, together with assets including websites, trademarks and commercial data, for a total of £600,000, from the administrators of GAK, the company behind GAK.co.uk and The Guitar, Amp & Keyboard Centre.
GAK’s demise marked the exit of a price-aggressive discounter from the UK market with annual turnover of roughly £20 million, and Gear4music should be able to exploit this change in the competitive landscape.
In fact, GAK is one of two price discounters in Europe which have gone under of late, as Netherlands-based online rival BAX lurched into insolvency on 2 April.
Shares sees a compelling market consolidation opportunity ahead for Gear4music, which should benefit from a more stable pricing backdrop and see increased volume from suppliers, thereby enhancing its gross margins and market share.
POSITIVE NOISES
Encouragingly, the monitor, mixer and microphone retailer returned to revenue growth in the second quarter of its last financial year and delivered a further reduction in net debt in the half to September 2024.
In its latest market missive, Gareth Bevan-bossed Gear4music assured investors the ‘marked improvement’ in UK and European like-for-like sales witnessed in the latter half of March was sustained over the first two weeks of April, with a return to double-digit sales growth over the last 30 days.
This positive momentum gave management ‘further confidence’ in meeting forecasts for the year ending 31 March 2026, with the consensus calling for revenue of £153.8 million, EBITDA (earnings before interest, tax, depreciation and amortisation) of £10.9 million and profit before tax of £2.65 million.
Reassuringly, Gear4music further reduced net bank debt to £6.4 million as of 31 March 2025 from £7.3 million at the end of March 2024 and £14.5 million a year earlier.
For the year to March 2026, Singer Capital Markets’ retail analyst Matthew McEachran forecasts a rise in adjusted pre-tax profit from £1.6 million to £2.8 million.
Based on Singer’s 9.6p earnings estimate for the new financial year, Gear4music trades on a prospective price-to-earnings ratio of 14.6, significantly below the stock’s own history.
The shares are a fraction of the £10-plus peak reached during the Covid crisis, but if market share gains and a return to earnings upgrades can power the stock back to even half those levels, investors will be handsomely rewarded.
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
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