Many have been left scratching their heads over how it all went so wrong.
In the last year alone, Made.com has lost its CEO and CFO, and has warned about earnings three times.
In its latest set of results, as of June 30, it said its cash pile had shrunk by £143m in the span of a year to just £32m, after it started stocking more furniture in warehouses to avoid supply problems. He too splurged on more storage space “in anticipation of strong growth” this year, only to be hurt by a drop in spending among squeezed shoppers.
“You have to wonder if they really understand the mechanics of the furniture industry,” says Clive Black, an analyst at Shore Capital. “It doesn’t look like there was any slack in their system.”
Aside from the operational side of things, Black says there also seems to be a similar strange approach to financial strategy. “It seems that the bank is empty.”
Made.com does not have preset credit or overdraft facilities. Its liabilities are made up of “trade”, meaning its suppliers, and leases, where it has taken storage sites. At the end of June this year, he owed both groups around £72m.
With demand for furniture declining as buyers are hit by the cost of living, and in light of Made.com’s financial condition, analysts say banks are unlikely to get any loans now.
“Nobody would lend them money,” says David Reynolds of Davy. “In its short public history, Made.com has been characterized as moving too slowly: flexing the business into a recession, fixing mistakes, and, in this case, moving into a commercial sale scenario.”
The threat of imminent collapse is now spreading within Made.com. Days before, staff had been emailing customers offering 15% off all lighting and “furniture in time for Christmas.” Now, experts say there is “a lot of concern” as no one is sure if they will still have a job by the end of the year.
Meanwhile, executives “must be terrified of all the public company obligations,” says another source. “Governance has to be tighter when administration is coming,” they say, amid pressure that any slip-up could lead to legal action against directors.
All this is generating anxiety within the business. The company had already begun laying off more than a third of its workforce as part of cost-cutting efforts, which also included consolidating its supply chain in Europe and Vietnam.
Now, however, those who had thought their jobs were secure face the threat that the business will finally collapse. “It’s possible, of course, that it just goes out of business altogether,” says Zalkin.
For customers, there is a clear desire to have some clarity on whether the orders they have placed will still come through. “Am I likely to get my bed on Nov 9 or am I just canceling my order?” a customer asked the retailer on Twitter.
Another said they had “used our wedding gifts to ask him for a couch and we can’t even get on his website anymore.” Made.com had not responded to questions from him by Wednesday afternoon.
While stopping trading is one option, there are others that could materialize. For one thing, a bailout financier “could come in and be able to recapitalize the business to keep it solvent,” Zalkin says, though he says recent company updates suggest that’s unlikely.
A prepackaged administration is a more likely outcome, Zalkin says, something that would allow a buyer to walk in and essentially leave creditors behind for the administrator to deal with, doling out any remaining cash after accounting for costs.
Such a process could attract more interested parties. Davy’s Reynolds says it could be a similar situation to Eve Sleep, the mattress retailer that crashed into management last week and was later bought by Benson for Beds that same day. “Like Eve Sleep, buyers will emerge who clearly didn’t want to pay the share price but are more prepared to buy distressed assets,” he says.
For now, Made.com says only that its board is “considering its position and a further announcement will be made in due course.”
“There can be no certainty that the terms of any offer or investment received are adequate,” the company told the market.
Made.com may be willing to assure customers that it’ll be “back soon,” but the reality of the situation is that it’s already out of reach for retailers.
