Made.com and Hotel Chocolat have both issued warnings over their profits, with the furniture retailer citing supply chain costs and low consumer confidence while the confectionary business plans a transitional year to focus on its most profitable markets.
Made.com issued its second profit warning in two months as boss Nicola Thompson said the etailer has “seen a worsening in consumer confidence since May”, which “has had an impact on this period’s performance”.
The retailer said that its gross sales in the first half had declined 19% year on year, exacerbated by a 5% decline in active customer numbers as “worsening consumer confidence has impacted demand for discretionary big-ticket items”.
Made said its profitability would also be impacted by £20m in non-recurring costs, which were driven by increased promotional activity to clear excess inventory and increased supply chain costs due to disruptions at ports and handling at warehouses.
Made said these costs had primarily affected the group’s performance in the first half and were expected to normalise for the remainder of the year.
The furniture retailer said it would aim to cut £10m to £15m in internal costs through “forward stock buying, warehousing and sourcing markets and reviewing our operational structure and headcount”, but these actions would not impact the 2022 balance sheet.
As a result, Made now expects its adjusted EBITDA for its current financial year to decline between £50m and £70m year on year, increasing from a previously forecast decline of up to £35m.
The company, which had previously said sales could be flat year on year, now expects full-year revenue to decline by as much as 30%.
Hotel Chocolat said in a trading update that its full-year sales for the 52 weeks to June 26, 2022, were up 37% year on year, and up 71% on pre-pandemic levels, while underlying pre-tax profit would be in line with the market consensus. However, the business said “given the current global macro-economic climate” it will “now deliberately focus its efforts over the next three years on its most proven and lowest-risk strategies with the greatest potential for further increased profitability and scaled cash generation”.
This strategy will see Hotel Chocolat focus on the UK and the success of its Velvetiser hot chocolate system but it will “materially reduce” investment in the US and Japan.
As a result, the retailer said sales would decline in the short term and some transitional costs would “lead to lower profits in [financial year 2023]”, but it aimed to drive higher profits in the following years with a strategic goal of being 20% EBITDA margin business by 2025.
Co-founder and chief executive Angus Thirlwell said: “A year of exceptional sales growth following two years of reactionary tactics to the pandemic has left clear opportunities for us to proactively streamline overheads and improve gross margins.
“While we expect a temporary lower sales growth rate and profit margin for FY23 as we carry through our adjustments, the result will be a business delivering greater results, with less risk and an even stronger balance sheet with a higher profit percentage growth in FY24 and FY25.”
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