- Sales sink on weak consumer confidence
- Board withdraws financial guidance
- Talks with suitors already under way
Shares in online furniture and lifestyle retailer Made.com (MADE) crashed 34% to 3.8p in early trading after the company announced it was considering raising capital to bolster its balance sheet.
The board of directors also withdrew its financial guidance for the year and said it was looking at ‘strategic options to maximise shareholder value’, including putting the company up for sale.
WHAT WENT WRONG?
Consumer-facing businesses have faced extremely tough conditions since Made.com came to the stock market in June last year, when the shares were priced at 200p each valuing the business at £775 million.
Due to the war in Ukraine, which has forced up the price of energy and many basic goods, consumer confidence in the UK has slumped to its lowest level since the 1970s according to market research firm GfK.
That meant Made.com had to increase discounts to tempt shoppers to spend in its shops, which negatively impacted its gross margins, while operating costs have kept rising.
The company had built up its inventories to improve the customer experience just as consumer confidence started falling, meaning it had a lot of working capital tied up at just the wrong time.
Compounding these factors, the disruption to supply chains and trend towards ‘deglobalisation’ has meant higher freight costs and extensive delays.
The firm’s freight costs jumped from £8.2 million in the second half of 2020 to £45.3 million in the second half of last year, and they continue to rise this year, but it hasn’t been able to pass the increase on fully to customers.
STRATEGIC OPTIONS
The company said its strategic review would involve ‘a broad range of options to either facilitate raising additional funding, for example through debt financing, through a strategic investment by a business partner or other market participant, by realising value from a sale of the group - or its business and assets - or through a business combination with another entity with sufficient funding for the combined group’.
The board said it had discounted raising money from shareholders as ‘the prevailing conditions are not supportive at the current time of raising sufficient equity from public market investors’.
While there have been ‘a number of strategic discussions with interested parties’, so far there are no offers on the table or takeover discussions.
