8th Mar 2022 17:12
(Alliance News) - Made.com Group PLC shares soared on Tuesday despite posting a widened loss, with investors cheering a strong-looking foundation over looming headwinds in 2022.
In one corner, the short-term outlook for Made.com is looking a little bumpy as supply chain issues persist - which cost the company dearly in 2021 - as well as inflationary pressures threatening consumer spending. In the other corner, higher gross sales and a broader product base are to provide a strong base after 2022's headwinds puff out.
"Furniture retailer Made.com has had a torrid start to life as a public company, trading nearly two thirds below its 200p issue price last summer," said AJ Bell Investment Director Russ Mould.
London-based Made.com sells its sofas, armchairs and other furniture in the UK, Germany, Switzerland, Austria, France, Belgium, Spain and the Netherlands through its eponymous website.
Made.com debuted last year in June.
Made.com reported a widened pretax loss of GBP31.4 million for 2021 from GBP14.6 million in 2020. Made put this down to a "dramatic" increase in the cost of freight, which grew GBP32 million compared to 2020 rates.
One-off costs of GBP5.3 million in relation to its initial public offering and share-based payment charges of GBP3.5 million also contributed to the loss.
"Its full year results offered little cheer to shareholders as the company posted a loss thanks to rising freight costs and supply chain issues, said Mould.
But Liberum analyst Wayne Brown disagreed, along with investors after the stock shot up 8.8% to 77.70 pence each in London on Tuesday.
Brown said: "2021 delivered an outstanding outcome: gross sales are now around 80% higher than pre-pandemic, and despite the global supply chain disruptions, lead times are nearing normalisation."
There are significant costs to unwind during 2022, Brown said, and together with further price increases in the first quarter of the year and broader product base, the group should exit 2022 with gross margins back to pre-pandemic levels.
Made.com posted a revenue jump of 50% to GBP371.9 million in 2021 from GBP247.3 million, saying this was thanks to a strong trading performance despite the extensive supply chain disruptions.
In 2020, it posted revenue growth of 17% to GBP247.3 million, helped by a boom in home improvement due to the Covid-19 pandemic. Its pretax loss narrowed to GBP14.2 million from GBP19.5 million in 2019.
Looking ahead, Made.com said it is no longer expecting a tailwind from the market in 2022, as consumer demand has been "soft" so far this year. It now expects growth to be driven by its "dramatically" improved customer proposition.
"Strategic initiatives are on-track, with lead times to fall to three to four weeks by 1H'22E, further expansion of homewares marketplace, and one-off investments to increase brand awareness in Continental Europe," Liberum's Brown said.
Made.com guided for annual gross sales of GBP500 million to GBP540 million, reflecting a 15% to 25% increase compared to 2021. Annual revenue is seen between GBP465 million to GBP500 million, representing 25% to 35% growth on 2021.
"The company does enjoy balance sheet strength and there is a bit more stability to the business now interim Chief Executive Nicola Thompson has been confirmed as staying in the role on a permanent basis, however there must be concern that a mounting cost of living crisis will depress demand for big ticket items like sofas," AJ Bell's Mould said.
Liberum reiterated Made.com's 'buy' recommendation, but tapered its target price to 230p from 250p previously.
By Greg Roxburgh, [email protected]; and Abby Amoakuh, [email protected]
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