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musicMagpie: consumer tech sector weaker than expected

Circular consumer technology retailer musicMagpie has said that the wider industry has been weaker than it anticipated and its margin pressures have persisted.

The group noted in its Interim Results announced on 27 July that, despite the current challenging macroeconomic environment, it expected an improved trading performance in the second half of the financial year.

musicMagpie said that it still expects that second half profitability will be a substantial improvement on the first half.

Consumer Technology (which represents around two thirds of Group revenue) has been weaker than anticipated and margin pressures have persisted, the company said.

More cautious consumer behaviour in both August and September has resulted in slower growth of outright sales on musicMagpie’s store.

The expansion of its other sales channels, including the positive launch on Back Market in May 2022, has not been able to fully offset the change as of yet.

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In the company’s latest trading update said: “The Group’s successful and growing device rental service is also reducing outright sales as customers choose to rent instead of making outright purchases.

“Whilst tempering results for the current financial year, rentals are significantly more profitable to the Group over the life of the device and have strategic importance given they provide recurring revenue and profitability growth in future years.”

October and November have historically been material contributors to overall company performance, with heightened activity and consumer interest around the Black Friday sales period, in particular.

The company is expecting Black Friday to prove to be a peak trading period.

“Accordingly, the Group now expects that revenue generated in the second half will show lower growth over the first half than previously expected and that profitability for the year to 30 November 2022 will be below its previous expectations and those of the market,” it wrote in the update.

“Looking further ahead, the Board remains confident in the Group’s strategy and in its medium-term growth prospects, underpinned by the growing and differentiated rental proposition.”

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