We hosted WEW at our European MidCap Event in Paris. Next to the ongoing business model transformation and capital allocation, these were the key takeaways:
Country expansion with low-risk and high opportunities: Following the successful blue-print of Portugal (profitable after only one year), WEW has expanded to ten more countries YTD. In our view, the ongoing expansion serves as a low-risk, high opportunity growth pillar for WEW: when starting a new country, 1) no CAPEX and no large fixed costs and 2) only low-risk marketing investments are incurred. Mind you, as WEW's social media presence is the world's largest inspirational account in the home & living segment, the customers in the new country often know the brand already.
Nevertheless, WEW will run brand awareness and targeted marketing campaigns which will be steered flexibly via return on net spend targets. Therefore, WEW could easily step away, should the expansion not go as planned. However, we regard this as unlikely, given that the WEW collection is growing across all countries, showing that the more global product assortments meets a homogenous demand in Europe and that the business is repeatable in other European countries. In 2026e, the expansion into the large UK market might also be in the cards.
Offline stores to foster loyalty and brand awareness. Next to country expansions, WEW is on track to open seven offline stores this year, as WEW's products and the positioning as a premium brand, require physical touchpoints. Moreover, this enhances a holistic brand and product experience in its key regions (e.g. Munich, Hamburg, Paris, Berlin), ultimately increasing brand loyalty. Also, on a standalone basis, the stores need to earn money and are not mere marketing channels, which should ultimately support and not weigh on the current margin expansion.
Return to growth around the corner. Following the start of the product assortment change in Q3'24, Q3'25e should already benefit from a bottoming-out effect. Mind you, the higher margin WEW collection GMV rose by 18% yoy in Q2'25e, whereas third party product GMV declined by 28% yoy. On top of that effect, we expect a positive impact from country expansions, but to a low extent in the next quarters. However, FY'26e and 27e should experience more pronounced country expansion effects, leading to overall high single-digit growth rates, expected by us. Naturally, this comes with positive scale effects and operating leverage which ultimately increase margins and cash generation further.
Despite the recent share price momentum, as the market seems to better realize WEW's attractive risk-return profile, shares are still heavily undervalued in our view. Trading at only 3.5x FY'26e adj. EBITDA seems highly unjustified for a growing, margin expansive and cash generative e-commerce business. Against this backdrop, we strongly confirm our BUY recommendation with an unchanged PT of € 20.00, based on DCF.
ISIN: DE000A2N4H07
