Strong brand and superior positioning. WEW occupies a strategic niche between low-margin mass market and luxury design brands, offering a curated mix of own premium products (62% of GMV) and select third-party design brand items (38%). This blend positions it as a one-of-a-kind destination for stylish living in Europe. Perceived as a design brand rather than just a retailer, WEW engages customers through strong storytelling and boasts 13m social media followers, making it the World's largest inspirational account in the home & living segment.
Return to growth not dependent on consumer sentiment. WEW's FY'25e sales growth (guidance: -4% to +2% yoy) is expected to remain muted (eNuW: -1% yoy) as planned, driven by a shift to higher-margin Westwing Collection products and the phase-out of lower-margin items. This mix is visible in a 21% yoy GMV growth for the Westwing Collection in FY'24 (Q1'25: 15% yoy), whereas third-party GMV declined by 12% yoy (Q1: -26% yoy). Afterwards, FY'26e group sales should rise again by 6% you, only by assuming 10% growth in the Collection and flat third-party GMV for FY'26e. Additionally, expansion into new countries (DK, SWE, LUX completed, c. 5-10 more this year) could add roughly € 30m in FY'26e sales, implying another 7% yoy sales growth. Combined, both drivers imply a 12-13% yoy sales expansion in FY'26e (eNuW: 10% you, due to conservative assumptions), excluding any rebound in consumer sentiment. In our view, the direction is clear, while uncertainty only prevails around the magnitude of the effects described above.
Capital allocation constraints. Despite a strong € 57m net cash position (36% of market cap) and being cash generative again, WEW's capital allocation options are limited: (1) no dividends due to negative retained earnings (FY'24: € -353m), (2) share buybacks restricted by current 10% treasury share cap, (3) low CAPEX needs, (4) no debt to repay. This leaves (5) M&A as the main option, but suitable targets are scarce given WEW's premium positioning.
With growth mainly driven by internal levers and margin improvements shown already, WEW's valuation of 3.3x FY'25e EV/EBITDA (2.1x FY'26e) appears unjustified for a cash-generative e-commerce business. We reiterate our BUY rating, confirm WEW in our NuWays AlphaList and maintain our DCF-based PT of € 18.00.
ISIN: DE000A2N4H07
