Shares dive as MusicMagpie warns on profits
By Abigail Townsend
Date: Monday 26 Sep 2022
(Sharecast News) - Shares in MusicMagpie plunged on Monday after the refurbished technology specialist warned on profits.
The Aim-listed firm said "cautious" customer behaviour had resulted in slower sales growth at the main MusicMagpie store, which had not been offset by revenue from other channels.
In addition, it warned that October and November - traditionally two of its strongest months, in large part because of Black Friday - were unlikely to perform as well as hoped.
It noted: "While the group continues to expect that Black Friday will prove to be a peak trading period, it now believes it is prudent to reduce its expectations for contribution from this period due to the worsening economic outlook and increasing cost of living pressures on the UK consumer."
As a result, revenue in the second half is now set to show lower growth over the first half than previously expected, with profitability for the year to 30 November also missing forecasts.
As at 0930 BST, the stock had lost over half its value, down 61% at 10.70p.
In July, MusicMagpie posted a dip in interim revenues, falling to £71.3m from £72.8m a year previously, which it blamed on "squeezed" customer wallets. Adjusted earnings before interest, tax, depreciation and amortisation fell to £2.6m from £6.2m, although MusicMagpie said it remained in line with expectations for the full-year.
At the time, the retailer said it expected to see an increased contribution in the second half from rental subscribers. However, on Monday MusicMagpie confirmed that while the rental service continued to grow, it was affecting outright sales as customers opted to rent rather than buy.
But it insisted "While tempering results for the current financial year, rentals are significantly more profitable to the group for the life of the device and have strategic importance."
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