(News Bulletin 247) – The furniture distribution specialist has revised its outlook for 2023 downwards, with Maisons du Monde bearing the brunt of inflation which is weighing on the purchasing power of households.

Recent notes from research firms predicted a difficult third quarter for Maisons du Monde in a context of consumer crisis. High inflation is pushing households to limit their spending on furniture.

TP ICAP Midcap returned to sale on the file at the end of last week, estimating that the French group’s next publication will be at “risk” with a “possible calling into question” of the objectives for the whole year. These analysts’ fears have materialized for the specialized distributor, which announced Monday evening after the market a lowering of its 2023 financial objectives.

The company therefore indicated that its sales between July and the end of September are expected to decrease by 9.4% compared to the same period in 2022, “despite tactical price adjustments, non-promotional commercial initiatives and increased product availability”.

With purchasing power eroded by inflation, households are focusing on purchasing essential products. And therefore ignore so-called discretionary consumer goods like furniture. A context which therefore weighed on the activity of Maisons du Monde between July and the end of September. “This revision is not a surprise to us and the new objective is in line with our expectations,” indicates Florent Thy-tine in his new note dedicated to Maisons du Monde.

Guidance on Ebit “worse than expected”

And for the whole of 2023, Maisons du Monde is not optimistic about the direction of its profitability despite the various initiatives launched recently to preserve its operating profit (Ebit). For the current financial year, the latter should ultimately be between 40 and 50 million euros while the Ebit was expected until now between 65 and 75 million euros.

“The guidance on Ebit is worse than expected”, notes Florent Thy-thine who thought “that the good work on the 3C plan (a strategic plan focused on the Customer, Costs and Cash, Editor’s note) would make it possible to display more resilience on Ebit despite the deterioration of the top line (turnover)”. The analyst continues: “We understand that the group wanted to give itself all the safety margins on this new objective.”

The cash generation objective is logically revised downwards. Free cash flow is expected between 20 and 30 million euros, where Maisons du Monde previously hoped to achieve a level of between 40 and 50 million euros.

“The announcements of guidance at the start of the year surprised us when management had just joined the group. The recent context made the objectives less and less credible,” reports TP ICAP Midcap.

Maisons du Monde preferred to take the lead two weeks before the official publication of its quarterly turnover scheduled for October 26. For the moment, Maisons du Monde shares are down 5.6%.

“If the stock has recently come under pressure, this profit warning could still weigh on the stock, particularly given the scale of the Ebit revision. For our part, we are adjusting our 2023 earnings per share by -35%” , adds Florent Thy-thine who consequently reduces his price target to 5.8 euros, while maintaining his sell opinion on the file.