Online furniture retailer Made.com is to shed more than a third of its workforce as deteriorating market conditions force it to either seek a buyer or raise more cash.
In an email to staff, sent last week and seen by the Financial Times, chief executive Nicola Thompson wrote of “unprecedented levels of market disruption and prolonged market volatility” and warned that conditions looked likely to get tougher.
She added that the business now needed to propose “some very difficult but necessary changes” that would partly reverse some of the expansion of recent years. Some 35 per cent of the group’s workforce is likely to go, with consultation processes already under way and those affected in line to leave by the end of October.
Made will also consolidate its supply chain in Europe and Vietnam, closing its operation in China, and reduce its warehouse capacity to reflect lower levels of consumer demand. Customer service will be outsourced to a third party.
The company spent much of the £90mn raised at its 2021 initial public offering to increase its sales capacity in the face of booming demand for homewares and bottlenecks in global supply chains. That included building up additional inventory in Europe to avoid confronting would-be customers with long lead times.
However, it left the company with too much stock just as demand started to tail off, forcing it to cut prices. Made has warned on profits three times this year and its shares have fallen to just 5.75p — a 97 per cent fall from their 200p IPO price just 15 months ago.
That backdrop, along with the collapse in Made’s share price, has made an equity issue more challenging and led many bankers and analysts to conclude that major shareholders will now push for a sale instead.
James Musker, an analyst at stockbrokers Davy, said the company “just doesn’t look strong enough” to raise the amount of cash that would be required in the equity markets.
That puts the company’s existing investors, which include Level Equity, Partech and co-founders Brent Hoberman and Ning Li, in a quandary. Many have backed the company since well before its IPO and risk being heavily diluted in the event of a cash call.
“Without fresh funds, there is a risk the equity value goes to zero,” Musker said. “They would be better off either taking it back themselves or finding another buyer like a private equity house that would cut costs and turn it round.”
In its most recent profit warning, issued in July, the company said it would look to cut about £15mn from annual running costs and consider options to strengthen its balance sheet.
But staff at the company were still taken aback by the scale of the cutbacks, according to one person with knowledge of the business. “Job losses were expected, but certainly not on this scale, with entire departments essentially being cut,” the person said.
“A lot of the staff [being made redundant] were only employed within the past 12 to 18 months,” the person added.
Thompson’s email also said the company would enact “a robust stock clearance strategy” and appoint a chief operating officer to focus on efficiency and cost reduction.
Made declined to comment.
Source: Financial Times