(BFM Bourse) – Following warnings from Target or Walmart a few days ago, the French furniture and interior decoration brand is carrying out a painful revision of its goals for 2022 or beyond. A new alarm signal with regard to the level of household consumption, which is increasingly threatened by inflation.
A few weeks apart is the difference. At the beginning of May, the Nantes-based Maisons du Monde Group reported the first quarter in line with expectations, which allowed it to reaffirm its financial targets for financial year 2022 (unless “the macroeconomic environment and ‘supply’ operating conditions deteriorate further). This maintenance was welcomed by an increase in the share price by almost 5%. Three weeks later, the furniture and decorative distributor is forced to significantly reduce its outlook not only for the current financial year, but potentially until 2025. As a result, the shares of Maisons du Monde on Euronext will fall by 22.56% to 13.70 euros. Paris on Friday around 10:00, the lowest level since November 2020.
Referring to the reservation made on 4 May that the achievement of the targets previously set for 2022 meant that the economic situation and supply conditions would not deteriorate, the company states that “these conditions have deteriorated significantly in recent weeks”, which requires an update of the assumptions. on which his business plan is based.
“Inflation in Europe is expected to remain high until the end of the year, which will have an impact on the level of consumer confidence and demand in the furniture and decoration sector,” Maisons du Monde said. In addition, “the development of the pandemic in China continues to create significant bottlenecks that generate additional costs and may slow down our supply plans.” As a result, “transport, raw materials and energy costs remain very high and should not decrease in the short term. In this context, cost projections have been underestimated due to high inflation and high volatility.”, Which temporarily affects Modelka’s gross margin “.
Replenish stocks while controlling costs
While the industry, which is renowned for its ability to set new trends, drawing on inspiration from various universes, including the historical theme of Asia, expected sales to increase this year, Maisons du Monde now expects an average single-digit decline (“medium single-digit negative”). -5%). The ebit margin, expected this year at around 9% after a record level of 9.5% reached in 2021, could actually fall to 5% and the amount of free cash flow could remain between 10 and 30 million euros, instead of the range of expected 65 to 75 million.
Despite weak demand, the group is committed to supporting the development of its sales through short- and medium-term action plans, while ensuring that its profitability is protected through strict cost control. Investments in its major strategic initiatives, such as the opening of a second logistics center and the continued establishment of the marketplace, will be maintained. Maisons du Monde also intends to continue to replenish its stocks to support future sales by managing supply constraints.
“Maisons du Monde remains confident in a profitable growth model,” as detailed during Investors’ Day in November 2021. The strategic plan unveiled on the occasion “remains fully valid,” the company said, but “the timetable for achieving the 2025 targets could According to its strategic plan, the Maisons du Monde has so far focused on sales of between € 1.8 and € 1.9 billion in 2025, generating a profitability of close to € 200 million in Ebit (ie a margin rate of around 11%), and intends to generate approximately € 350 million in cumulative free cash flow for the entire period 2022-2025.
Guillaume Bayre – © 2022 BFM Bourse