Made.com flags possible group sale as fundraising options dwindle

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After signaling a potential capital raise this summer to strengthen its balance sheet, Made.com has decided to proceed with a formal review of the various strategic options available to it, in order to maximize shareholder value.

Made says a combination of unfavorable global macroeconomic conditions – from a drop in discretionary consumer spending to destabilized supply chains – combined with events of the past two weeks in the UK, has led Made to withdraw its forecast for the full year. She is currently exploring various cost reduction options and the possibility of bundling.

“Global macroeconomic conditions have changed dramatically in the 15 months since Made’s IPO, creating two major headwinds for consumer companies,” Made says. “The first headwind is lower discretionary consumer spending resulting from rising inflation and a sharp decline in consumer confidence. During the first half of 2022, major Made markets experienced adverse developments macroeconomic conditions, including economic downturns, rising commodity and energy price inflation, spurred by Russia’s invasion of Ukraine, which has created greater uncertainty about the duration and further deterioration of these adverse conditions and other contributing factors.These adverse market conditions caused a sharp decline in consumer confidence and contributed to a significant withdrawal of discretionary spending.

“In addition, these conditions contributed to an increased need to sell goods at a discount to meet inventory levels to adjust to adverse market conditions, which negatively impacted gross margin and resulted in negative fixed cost operating leverage.Made’s previous strategy to grow inventory and range availability to improve customer experience and conversion rates through faster lead times coincided with this strong decline in consumer confidence and resulted in Made being overstocked, with more cash tied up in working capital.

“The still unfavorable market conditions also made it difficult for the group to acquire new customers at financially attractive rates, which led to higher customer acquisition costs.

“The second headwind has been the de-globalization and destabilization of supply chains, leading to reduced reliability and increased costs. Macroeconomic conditions and recent geopolitical events have impacted supply chains. supplies, leading to increased industry-wide freight costs Since November 2020, resulting global freight disruptions resulting from, among other things, the Covid-19 pandemic, have resulted in reduced freight capacity on the entire market, delays in freight forwarding and significantly higher freight costs.

“The group has been affected by these events. In the second half of 2021, significant increases in spot market rates for freight contributed to an increase in freight costs from £8.2m in 2020 to £45.3m in 2021, that the group has been unable to fully pass on to customers in an increasingly tight macroeconomic consumer environment, leading to lower margins, despite the recent drop in freight rates , of which the group has not yet been able to realize the benefits. In addition, the costs of last mile delivery and the significant additional fuel costs of carriers, caused by the resulting impact of the Russian invasion of Ukraine on Global fossil fuel prices contributed to higher fulfillment costs that depressed margins.”

Made says it has taken several steps to manage its cost base and cash flow this year, including “significantly reducing the level of forward inventory purchases, reducing capital expenditures, implementing a hiring freeze, eliminating spending of the brand’s marketing activity and lay the foundations for an opening up of European sourcing and a new non-stock market model.

“In order to further extend the group’s cash trail, the board has concluded that costs need to be reduced further and a process has begun to implement further cost reductions, including a strategic headcount review, in the coming weeks, while maintaining the appropriate skills and resources, to be able to effectively lead the strategic review process.

“As previously announced, the Board of Directors has considered ways to strengthen the Group’s balance sheet, including a possible fundraising. In light of a number of factors, including the continued uncertain business conditions, the Board of The administration has concluded that current conditions are not conducive to raising sufficient equity from investors in the public markets at this time.

“As a result, the Board has decided to undertake a strategic review, which will involve a wide range of options to facilitate the raising of additional funds, for example through debt financing, through strategic investment by a business partner or other market participant, by realizing value from a sale of the group – or its business and assets – or through a business combination with another entity having sufficient funding for the combined group.”

PwC has been appointed financial advisor to Made on the strategic review and formal sale process.

“While the group has had a number of strategic discussions with interested parties, the group is not receiving any approach, nor is it in discussion with a potential bidder, at the time of this announcement,” Made continues. “As described above, the board stresses that a sale of the group is only one of many strategic options to be considered as part of the strategic review. Another option being considered is to seek a strategic investment in the group.”

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