Yahoo Finance Made.com cuts forecasts and warns of job cuts amid cost of living crisis
Made.com has cut its revenue and profit forecasts and warned of job cuts as costs rise and customers reduce spending on “big ticket” home improvement purchases because of the cost of living crisis.
Shares in the online furniture retailer, which have lost almost 90% of their value since the company floated at 200p last June, plunged 38% to 24p on Tuesday morning.
The share price of another struggling retailer, Hotel Chocolat, took an even bigger hit after it announced the cancellation of all international expansion plans. Hotel Chocolat’s share price was down just over 50% at lunchtime on Tuesday.
Made.com issued its third profit warning in less than a year on Tuesday, saying that recent trading has been “volatile” and that it now expects annual losses of £50m to £70m, up from a previous forecast of £15m to £30m made in May.
“It’s clear things are tough for consumers at the moment,” said Nicola Thompson, the chief executive at Made.com. “As such it’s prudent for us to take a conservative view of what we can expect in the second half of this year.”
The company said sales in the first half were down 19% year on year, but up 55% compared with the first half of 2019, adding that “management is considering options to allow the company to strengthen its balance sheet”.
Made.com said it expected to book £20m more in costs this year because of disruptions at ports, extra handling at warehouses and promotional and clearance pricing of excess inventory.
The company, which said it expected gross sales to fall by 15% to 30%, compared with a previous forecast of flat to down 15%, said it was seeking to make £15m in savings.
“The management team is actively addressing all non-strategic fixed costs across the business to enable the return to attractive unit economics and ensure the business operating model is flexible for the new environment and better positioned to deliver the long-term strategic goals,” the company said.
“Areas of focus include looking at forward stock buying, warehousing and sourcing markets, and reviewing our operational structure and headcount.”
Hotel Chocolat, which said it would report a loss this year, intends to implement a three-year plan to focus on its “most proven and lowest-risk strategies with the greatest potential for further increased profitability and scaled cash generation”.
This includes halting all investment beyond “necessary working capital only” for its operation in the US, which will become online-only and wholesale when its last retail outlet shuts next year, and its joint venture in Japan.
The company said this plan would mean lower sales growth and profits next year, leading investors to send Hotel Chocolat’s share price tumbling.
