Made.com is reviewing its workforce headcount and may tap shareholders for cash, after the online furniture retailer issued its third profit warning in less than a year.
The company, which sells designer sofas, said the cost of living crisis is hitting demand for big ticket-items, with UK sales tumbling 22 per cent in the first half.
Losses are now expected to widen to between £50million and £70million, OKEPLAY777 from previous expectations of £15milion to £35million, and Made.com said it was looking at ways to slash costs.
Falling sales: Made.com said worsening consumer confidence was hitting demand
It is reviewing its ‘operational structure and headcount’ in a bid to save between £10million and £15million, and also ‘considering options’ to bolster its its balance sheet.
The update sent tumbling 38 per cent to 23.76p in morning trade.
They were worth 200p when it listed on the London stock market a year ago – a decline of almost 90 per cent.
‘It’s clear that things are tough for consumers at the moment,’ said Made.com chief executive, Nicola Thompson.
‘Understandably, we’ve seen a worsening in consumer confidence since May and this has had an impact on this period’s performance.
‘As such, it’s prudent for us to take a conservative view of what we can expect in the second half of this year.’
Group gross sales were down 19 per cent in the first half compared to last year, with the UK seeing a decline of 22 per cent and Europe’s sales down 15 per cent.
The group struggled to retain customers and get them to spend, with UK active customers dropping 8 per cent and orders slumping 29 per cent.
In Europe, active customers dropped by a smaller 1 per cent and orders were down 21 per cent.
The company has also had to launch cut-price promotions to shift old stock, which has hit profits, while it is also facing extra supply chain costs due to disruption at ports and extra handling at warehouses.
Last month, fellow furniture retailer DFS also warned on profits, saying it had seen order levels fall in its fourth quarter, coinciding with a ‘change in demand patterns’.
‘If you want a clear sign that recession could be on its way, you only need to look at the state of sofa seller Made.com,’ said financial analyst Danni Hewson of AJ Bell.
‘Having warned of a shift in consumer spending patterns in May, the company says things are getting even worse, prompting it to slash forecasts for sales, earnings and cash.
‘Faced with the prospect of an economic downturn and a rising cost of living, consumers will naturally take a hard look at their spending.
‘Any “nice to have, but not vital” items will get put to the back of the priority list and a chunk of the population will ultimately conclude they only have enough money for essentials.’