French furniture and home decor company Maisons du Monde has reported a significant downgrading in its guidance’s following turbulent trading conditions.
On the back of its previous update at the start of May, Maisons then said it had made a ‘slow start’ to the year but was confident moving forward if there were no further deterioration of macro-economic and supply chain conditions.
In its latest update at the end of May, the company revealed that these conditions have ‘materially worsened over the last few weeks’ and its second quarter is now expected to be ‘high single digit negative’ compared to its previous ‘positive’ top line growth forecast.
Maisons du Monde said that it also expects EBIT margin to be around 5% or above, downgrading from its 9% initial guidance.
The company has pointed at inflation in Europe, the evolution of the pandemic in China and high costs as main contributors to the downgrade.
In a statement, Maisons said: “Inflation in Europe is forecast to stay at high levels for the remainder of the year, hampering consumer confidence and the underlying demand for the category.
“The evolution of the pandemic in China keeps generating serious bottlenecks which add extra costs and may slow down our restocking plans.
“Freight, raw material and energy costs remain at very high levels and are not expected to ease in the near future. Against this backdrop of high inflation and volatility, projected costs have been underestimated, temporarily impacting the gross margin model.”
The company added that despite the ‘soft demand’, it is committed to protect profitability through cost controls, with plans to maintain investment in ‘strategic initiatives’ such as the opening of its second logistics centre.
“The high uncertainty of the global topline context, together with the revision of its projected gross margin assessment, have led the Group to review its full-year objectives,” Maisons added.