Struggling furniture seller Made.com reveals it might be sold off

Embattled retailer Made.com could be sold or merged after bosses determined it would be unable to obtain enough equity from shareholders.

The online furniture seller said last month it was considering a capital raise to try and shore up its balance sheet, which has been battered by declining sales and surging losses in the past year.

Having concluded that such an option is not feasible, partly due to current trading uncertainty, the firm has begun a strategic review to assess alternatives.

These include a strategic investment in the group by a business partner, a merger with another company, debt financing, or a formal sale process.

Made said it had engaged in discussions with interested parties but had not received any takeover approaches, nor was it currently in talks with any potential buyers.

Alongside this, the retailer announced that it would continue to cut costs,  including a review of staff headcount ‘within the next few weeks’, having already implemented a hiring freeze.

The Financial Times reported yesterday that the company was considering shedding up to 35 per cent of its workforce and had already started consultation processes with certain employees who are set to leave in October.

According to the FT, Made chief executive Nicola Thompson sent an email to staff last week warning that ‘some very difficult but necessary changes’ had to be made.

Made floated on the London Stock Exchange 15 months ago following a pandemic-induced windfall spurred by lockdown restrictions forcing homewares stores to temporarily close their doors.

People also spent increasing amounts of time indoors, giving those with extra savings more opportunity to redecorate their properties, while a stamp duty holiday encouraged a homebuying boom.

But since listing, the London-based group has had to deal with worsening supply chain issues that have led to some customers either cancelling or waiting months for their deliveries and much higher freight rates.

In the second half of last year, Made said its freight costs from just £8.2million in 2020 to £45.3million, and it has not been fully able to pass on these extra costs to customers.

Problems have been compounded this year by soaring energy and commodity prices – and other inflationary pressures – contributing to widespread economic stagnation and sliding consumer confidence across Britain and Europe. 

Made added: ‘The ongoing adverse market conditions have also made it challenging for the Group to acquire new customers at financially attractive rates, resulting in higher customer acquisition costs.’ 

The business has responded to these pressures by selling inventory it had stockpiled when responding to logistics issues at discounted prices, severely impacting margins as a consequence. 

After slashing its earnings guidance for the third time this year in July, Made announced today that it had withdrawn its full-year guidance due to continued economic uncertainty, and the ‘unexpected events of the past two weeks in the UK compounding the deterioration of trade.’

Made.com shares slumped by 20 per cent to 4.6p on Friday, meaning their value has plunged by over 97 per cent since its initial public offering in June 2021. 

When it listed on the London markets, the firm, co-founded by Lastminute.com entrepreneur Brent Hoberman, had a market capitalisation of about £775million compared to around £18.2million today. 

‘Whatever happens, it looks like existing shareholders may be wiped out or be left with a mere fraction of their original investment,’ remarked Russ Mould, investment director at AJ Bell.