Shares of Made.com group could jump more than 70% due to increased sales
seeks to get more consumers to buy sofas and housewares online.
The e-commerce company, which makes items to order and sells them primarily on its websites rather than in showrooms, went public on
London Stock Exchange
earlier this year. But it’s not a startup: it launched its first website in the UK over 10 years ago and has gradually expanded from upholstery to furniture and accessories.
Made (ticker: MADE: UK) has low warehouse costs as items are delivered to customers from the factory through a ‘just-in-time’ distribution center which receives the products when they are ready to be dispatched for shipment. ” avoid high storage costs. It has now deployed its websites in eight European markets.
While the shares have fallen to 140 pence ($ 1.91) since their debut at 200 pence in June, this is largely attributed to disruptions to the company’s supply chain caused by the pandemic, which resulted in delays in deliveries. Made has also benefited from consumers shopping more online because they have stayed at home during shutdowns.
Consumers tend to buy less furniture online than electronics and clothing. Online sales in the regions where Made operates made up only 12% of those markets before the Covid pandemic in 2019, and were worth £ 12 billion, according to Euromonitor estimates provided by Made.
Wayne Brown, analyst at brokerage Liberum, has a buy rating and estimates the shares could reach 250 pence. He says Made “now appears to be at an inflection point, with Covid-related lockdowns resulting in six years of structural change in one year.”
Made is in a good position to capitalize on these increased online sales for a variety of reasons. The demographics are in its favor: over 50% of Made’s customers are under 35, and over the next five years millennials are expected to make up 38% of the total homebuying population, according to the 2020 report on the generational trends of home buyers and sellers. Made also has a “green” program by working with suppliers who use environmentally friendly materials and packaging.
The trend towards teleworking means that consumers are investing more in their home environment. According to Liberum’s Brown, Made is disrupting the fragmented furniture and accessories industry in the same way that brands like Nike, Apple and Beyond Meat “are all global disruptors who have transformed their own industries.”
Made has a market value of £ 545million ($ 746million) and employs 650 workers. The company had approximately 1.1 million active customers in 2020.
For the year ended December 31, Made recorded a loss of £ 14.2million due to investments in business expansion, with revenue of £ 247.3million . That figure was lower than the loss of £ 19.5million in 2019 on sales of £ 212million. Liberum’s Brown estimates sales will quadruple to £ 1.28 billion by 2025.
Made’s CFO Adrian Evans said Barron that “we have demonstrated a solid history of growth and that there is very good room for maneuver for us”. Made is different from its competition because it offers premium design at affordable prices, he says, adding that “we continue to see a robust sales trajectory.”
John Stevenson, analyst at broker Peel Hunt which has a buy rating and price target of 225 pence, said that since the larger online furniture and home furnishings market in regions in which Made operates is expected to double by 2025, “the path to £ 1 billion + in revenue is not difficult to chart. The debate around profitability and margin structures is more nuanced.