Made today warns that faltering consumer confidence, supply chain inflation and the cost of clearing excess stock could mean a full-year loss of between £50m and £70m. It is reviewing its operations and headcount as it looks to cut costs, and is also looking at options to strengthen its balance sheet.
The design-led furniture and homewares pureplay saw its business grow quickly during the pandemic, a period when customers looked to improve their homes during lockdown and bought more online than previously. The retailer stocked up and invested in further warehousing in order to deliver faster to customers and in May bought the Trouva platform in order to expand its marketplace functionality. But now inflation has hit and trading has been “volatile” as confidence worsens.
The company says in a first half trading update that group gross sales in the six months to June 30 2022, were 19% down on last year, but 55% ahead of pre-pandemic 2019. UK sales of £88m were down by 22% on last year, but 45% ahead of 2019. Sales in continental Europe were 15% down on last time, but 67% ahead of 2019.
In the first half of this year, active customer numbers fell by 5% year-on-year – falling by 8% in the UK and by 1% in Europe – while repeat orders increased to 48% and average orders grew by 9%, year-on-year, to £266. By the end of the half, the retailer had net cash of £31.5m, which it said reflected high levels of investment in inventory – with a knock-on effect on profitability.
Hit to profits
Made, ranked Top250 in RXUK Top500 research, now expects full-year profits to be lower following one-off first half costs of about £20m. That comes from higher levels of promotional activity to clear stock, and rising supply chain costs. It says supply chain costs have risen at “elevated levels” as freight costs remain higher than expected and carriers put fuel surcharges in place. That stems from disruptions at ports and extra handling at warehouses.
Made expects gross sales to be between 15% and 30% down on last year, and net revenue to be between 9% and 24% lower. At the bottom line, it expects to deliver an adjusted EBITDA loss of between £50m and £70m.
The retailer is now reviewing its operations, stock buying, warehousing, sourcing and headcount as part of a drive to cut costs across the business as it looks to operate in a new trading environment. That is expected to boost profits by between £10m and £15m, however Made expects to see only a minimal benefit in the current financial year an it is considering options to strengthen its balance sheet.
Nicola Thompson, chief executive of made.com, says: “It’s clear that things are tough for consumers at the moment. Understandably, we’ve seen a worsening in consumer confidence since May and this has had an impact on this period’s performance. As such it’s prudent for us to take a conservative view of what we can expect in the second half of this year.
“It’s thanks to the hard work and determination of our team at Made that we’ve made strong strategic progress over this period, despite the challenging macroeconomics. Looking at our performance over recent years, we have managed to grow the business by 57% since 2019, our last undisrupted year, and increased our market share. To enable us to continue executing on our strategy we’re taking steps to address the non-strategic costs in the business, as well as considering options to allow us to strengthen the balance sheet sufficiently to navigate what will undoubtedly continue to be challenging conditions. We’re confident that this will put us in a strong position for the coming years.”
Homewares now account for 30% of Made sales – up by two percentage points (pp) since the same time last year, and by 8pp since 2019.
Made now sells in nine markets, having recently relaunched its business in Ireland, where it says customers have responded well. It sells primarily online and has seven showrooms across Europe, including flagships in London and Paris.
The retailer continues to integrate Trouva. The first products are expected to be sold on the made.com curated marketplace before the end of September – and more than 2,500 products are expected to be available on it by the end of the year.