Online Furniture Maker Looks Primed for Growth. Shares Could Pop.
Furniture maker Made.com Group is looking to get more consumers to buy sofas and housewares online.
The e-commerce business, which makes items to order and sells them mainly through its websites rather than showrooms, went public on the London Stock Exchange earlier this year. But it’s not a start-up—it launched its first website in the United Kingdom more than 10 years ago and has gradually expanded from upholstery to furniture and accessories.
Made (ticker: MADE.UK) has low warehouse costs because items are delivered to customers from the factory via a “just-in-time” distribution center that receives products when they are ready to ship to avoid expensive storage costs. It has now rolled out its websites in eight European markets.
While shares have fallen to 140 pence ($1.91) from their 200 pence June debut, much of this is attributed to disruptions in the company’s supply chain caused by the pandemic, which led to delays in deliveries. Made also has benefited from consumers making more purchases online as they stayed at home during lockdowns.
Consumers tend to buy fewer furnishings online than electronics and clothing. Online sales in the regions in which Made operates accounted for just 12% of those markets before the Covid pandemic in 2019, and was worth 12 billion pounds sterling (about $16 billion), according to estimates from Euromonitor provided by Made.
Wayne Brown, an analyst at broker 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 having driven six years’ worth of structural shift in one year.”
Made is in a strong position to capitalize on these increased online sales for a variety of reasons. Demographics are in its favor—more than 50% of Made’s customers are under 35, and over the next five years millennials are forecast to comprise 38% of the overall home-buying population, according to the 2020 Home Buyers and Sellers Generational Trends Report. Made also has a “green” agenda by working with suppliers who use environmentally friendly materials and packaging.
The trend toward working from home means consumers are investing more in their domestic environment. Liberum’s Brown says Made is shaking up the fragmented furniture and accessories sector in the same way that brands like Nike, Apple, and Beyond Meat “are all global disruptors that have transformed their own sectors.”
Made has a market value of £545 million and employs 650 workers. The company had about 1.1 million active customers in 2020.
For the year ended Dec. 31, Made posted a £14.2 million loss due to investments in expanding the business, on sales of £247.3 million. This was narrower than the £19.5 million loss in 2019 on sales of £212 million. Liberum’s Brown estimates sales will quadruple to £1.28 billion by 2025.
Made’s finance director, Adrian Evans, told Barron’s that “we’ve demonstrated a strong track record of growth and there is very good headroom for us.” Made is different from competitors because it offers high-end design at accessible prices, he says, adding that “we continue to see a robust sales trajectory.”
John Stevenson, an analyst at broker Peel Hunt who has a Buy rating and a 225 pence price target, says that as the broader online market for furniture and home accessories in the regions in which Made operates is set to double by 2025, “the path to £1 billion+ revenue is not difficult to plot. The debate around profitability and margin structures is more nuanced.”