British online furniture seller Made.com halts trading amid bailout talks – CNBC | NutSocia

A view of a Made.com High Street shop in central London on October 28th, 2022 in London, England.

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LONDON — Millennial-focused furniture retailer Made.com suspended trading of its shares on the London Stock Exchange on Tuesday after failing to agree a bailout deal before a deadline in November.

The ailing company, which halted new customer orders on Oct. 26, also filed a notice of its intention to appoint administrators from PricewaterhouseCoopers.

Made now has a 10-day period of protection from creditor lawsuits, during which it intends to hold final talks in hopes of agreeing a full or partial sale before administrators are called in.

In its statement, it said it had received proposals to acquire some or all of its businesses, assets and brands, but could not guarantee these would be completed.

The Management Board is currently assuming that its shares will be withdrawn and the remaining value distributed among the shareholders.

Listed on the London Stock Exchange at £1.99 per share in June 2021, valuing the company at £775m ($893m) after posting record sales driven by people renovating their homes during the coronavirus pandemic. were boosted.

But the share price has steadily declined since the IPO, which accelerated amid the risk-off 2022 environment that has battered tech stocks.

Its shares hit 20p in July as the company cut its sales and profit forecasts for the third time in a year and were worth less than 1p at the time of Tuesday’s suspension.

Made.com became known for its range of Scandinavian, retro-inspired and colorful furniture, with pieces like its velvet sofas getting widespread Instagram support, aided by the use of influencer marketing.

However, customers also complained about long delivery times for some items, especially as global supply chain issues worsened in 2021.

The company reported revenue of £372m in 2021, up 50% on the previous year, but its EBITDA (earnings before interest, tax, depreciation and amortization) losses widened from £2.9m to £18.3m.

It had also considered attracting shareholders for additional funds before announcing in September it was seeking a buyer or an emergency investment, saying conditions were “not favorable at this stage to raise sufficient equity from public market investors.”

It also said at the time that it would seek to lay off a number of its 700 employees, which the Financial Times estimated would account for 30%.

Hard conditions

“Customers shy away from bulky items,” said Sophie Lund-Yates, senior equity analyst at financial services firm Hargreaves Lansdown. “When the cost of living becomes prohibitive, expensive furniture purchases are delayed, and that’s the pattern we’ve seen at Made.com.”

UK retail sales data for September showed shoppers curtailing purchases of items like televisions, computers and furniture but boosting sales of energy-efficient appliances like air fryers, which the British Retail Consortium attributed to falling consumer confidence.

Despite a package of government support, energy bills will be higher for most households this winter and annual inflation is over 10%.

“The financial concerns raised by the drop in orders were only part of the group’s downfall. The second is their inability to receive an external bailout, which is a direct result of the current inflationary environment,” added Lund-Yates.

“It’s well known that discretionary consumers are an area of ​​the economy that will suffer for some time, which has prevented Made from attracting any supply,” she said.

Other online-first companies listed in London in 2021 following pandemic growth have also suffered falls in share value, including Deliverooup 55% this year and retailers THGdown 71%.

change of direction

Made was founded in 2010 by Ning Li, a Chinese-born, Paris-based entrepreneur who also founded vegan skincare brand Typology; and British investor Brent Hoberman, founder of Lastminute.com.

The concept, which they had outlined in previous interviews, was to commission furniture and home accessories designs, market them through the Made website, and only manufacture them when an order was placed, with direct shipping to customer homes required minimal storage.

Hoberman, who has since left Made and is no longer on the board but remains a shareholder, told CNBC in an interview that aired in October: “The company went public, there was Covid, which meant there was so much demand, and they did. They thought that was a structural change I guess and wanted to move on.”

“Covid is coming, recession is coming, interest rates are coming, the supply chain disruption we all know about. So many external, really hard factors. So you were unlucky,” he said.

“But they raised £100m in the IPO… and they seem to have spent most of that buying it [product] Equities, which is a shift from the original business model, which I think is unfortunate.”

Hoberman said he believes Made has fallen into the trap of losing sight of its unique selling proposition after the sale and has been pressured by the market to continue the high level of growth.

“If your lead times are too long, you have to buy more inventory and compress it, and that got you into trouble,” he added.

Li stepped down as CEO in 2017 and said on LinkedIn last week: “12 years ago, my co-founders and I started a small budget young company in Notting Hill with the simple idea of ​​making high-end design accessible to everyone. The idea became a £430million deal last year.”

“The mantra was simplicity – because it meant value for our customers and cost-efficiency for the business. From my perspective today, I think that the brand has lost sight of this focus in recent years and has lost strength as a result. “

The company is currently led by Nicola Thompson, former head of global customer development at fast fashion retailer ASOS.

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