Made.com losses more than double to £31.4mn on higher freight costs

Made.com has warned that profits will remain under pressure after its losses doubled last year, as the UK online furniture retailer grappled with global supply chain disruption and rising transport costs.

The furniture sector has been one of the hardest hit by the steep inflation in freight costs as many of its big, bulky items — or the raw materials they are made from — are sourced from China and elsewhere in Asia.

Made, which targets design-conscious millennials, listed in London last June. Its market value has since dropped from £775mn to £285mn. Its shares were up more than 6 per cent by lunchtime on Tuesday.

The company also announced that it had appointed interim chief executive Nicola Thompson as its full-time boss, less than three weeks after Philippe Chainieux resigned citing family reasons. Thompson was previously chief operating officer.

Delays to deliveries caused by supply chain issues have weighed on Made’s revenue, as payments are only recognised when the furniture is delivered to the customer. The company said that roughly £56mn of sales had been pushed from the previous financial year into the current one, up from a previous estimate of £45mn.

Freight costs rose more than fivefold in the year to December 31, compressing gross margins. Pre-tax losses widened from £14.6mn in 2020 to £31.4mn, worse than the consensus forecasts for a £24mn loss.

Adrian Evans, Made’s chief financial officer, said: “There’s been a really significant movement in freight costs through the year, we’ve managed that really well and we’ve got flexibility through the model. That’s set us up well to make sure gross margin is in line with midterm guidance.”

Yet Made pointed to a “softness in consumer demand” and said that earnings before interest, taxes, depreciation and amortisation would be between £5mn and £15mn in 2022, compared with analyst expectations for roughly £17mn.

Despite the lower than expected outlook, the company said it remained on track to achieve its 2025 guidance of £1.2bn in gross sales.

Wayne Brown, an analyst at house broker Liberum, highlighted that Made’s revenue of £371mn for 2021 was 80 per cent higher than before the coronavirus pandemic.

Compared with rivals such as DFS, Made had “absolutely taken market share”, said Brown, adding that while the company had pared back growth predictions “a little”, its medium-term objectives remained unchanged.

Made said it had expanded its warehousing facilities to meet increased customer demand and planned to sell more products from stock rather than making them to order.

This will cut average lead times to roughly three or four weeks by the end of the first half of the year, compared with seven to eight weeks during the pandemic, but will tie up more cash in inventory.

“We’re on track to reduce our lead time,” said Thompson. “We’ll naturally pick up more sales from stock. Previously, 60 per cent of sales came from stock that was not on hand, that’s now flipping to 60 per cent of stock that is on hand.”