Made.com shares fell 10.4% to 8.8p in late morning trading on Thursday after the furniture group confirmed speculation that it was considering a potential equity capital raise to “strengthen its balance sheet.”
“Turns out that selling on-trend but relatively pricey furniture is not a great model in the current economic environment,” said AJ Bell financial analyst Danni Hewson.
“Online furniture retailer Made.com looks like it is being forced to pursue an emergency fundraise, which had been euphemistically hinted at in a statement a month ago when it said it was ‘exploring ways to strengthen its financial position.'”
The company said it would be pursuing a range of possible options to return its finances to decent health, and would announce any further decisions or strategies to investors.
“Investors have seen the shares lose more than 90% of their value and may be reluctant to put good money after bad, although if they want to protect some continuing value in their investment they may have little choice,” said Hewson.
“In different times Made.com might have been a decent proposition, and it has continued to win market share, but now it faces a desperate scramble to reduce costs in order to keep the lights on. Made.com needs to sort out inventory issues – effectively clearing out excess stock by selling at a discount – and hope this doesn’t undermine the brand and make it difficult to sell at full price in the future.”
“The company has to make sure it gets the basics of retail – holding the right amount of stock while still having what customers want, when they want it – spot on in the future as it is likely to have very little margin for error.”
