- Online furniture seller warns on profits
- Pushes back £1.2 billion sales target
- Broker says Made.com is vulnerable to takeover bid
Shares in Made.com (MADE) plunged 15% to 54p after the online furniture retailer posted a profit warning with trading proving ‘volatile’ in recent months and ‘more challenging than anticipated at the start of the year’.
Given the much weaker market backdrop for 2022, the self-styled ‘digital lifestyle brand for the home’ no longer expects to deliver against its 2025 £1.2 billion of gross sales target, though management remains very confident in the long term value drivers of the business.
SHARP DOWNGRADES
Amid the worsening cost of living crisis, Made.com now assumes the online home and furniture market will remain ‘highly challenging’ for the rest of 2022 despite facing ‘significantly easier’ second half comparatives.
As a result, the online furniture purveyor has downgraded its 2022 sales guidance from 15% to 25% growth to between flat and down 15% and now expects to deliver an adjusted EBITDA loss of £15 million at best, £35 million at worst, after supply chain disruption costs.
That compares with earlier expectations of positive EBITDA of between £5 million and £15 million and follows a profit warning in December 2021 pinned on the impact of supply chain disruptions.
‘There is no escaping the tough trading environment at the moment,’ conceded chief executive Nicola Thompson, though she insisted Made.com is ‘laser-focused on executing our strategy and we are delivering strong progress across each of our strategic pillars. Our customers are at the heart of our business and we’re seeing a really positive reaction to our improved proposition, with average lead times consistently at the targeted 3-4 weeks average for the last two months.
‘Made continues to outperform the online furniture and home market and I am confident the company will emerge in a very strong position.’
Third party data suggests that the online furniture and home market is down around 30 to 40% so far in 2022, while Made.com’s sales were down only 10% in the first quarter.
However, Russ Mould, investment director at AJ Bell, said: ‘Investors don’t care that sofa seller Made.com is outperforming the market given the whole sector is experiencing a sharp decline in trading thanks to the cost-of-living crisis.’
As far as investors are concerned, ‘Made.com’s earnings expectations have been sharply downgraded which means the stock is far less appealing to own, hence the big share price slump on the news.
‘Big ticket items are the first things consumers will delay when the going gets tough, as the idea of shelling out £1,000 or more on a sofa seems excessive when the cost of energy, food, drink and more is racing ahead. Households will have to make their current sofa last a bit longer, and the same applies to other expensive purchases such as electronic goods unless they’re broken and desperately need replacing.’
THE LIBERUM VIEW
‘A worsening consumer backdrop has led to a reappraisal of guidance and outlook,’ commented Liberum Capital.
‘On the positive, Made continues to outperform the market by circa 20 percentage points and this is underpinned by several self-help levers. On the negative, near-term outlook for sales, and profits falls well below where we were expecting. As disappointing as this is, Made is performing better than peers, but this serves as a signal of how tough the consumer backdrop is.’
The broker added that Made.com’s ‘Current valuation, balance sheet strength combined with long-term prospects mean the company looks vulnerable to an approach.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Steven Frazer) own shares in AJ Bell.
