fashionette released mixed Q4 preliminary figures. Sales and earnings arrived somewhat below expectations while cash flow came in strong. Our key takeaways:

Q4 sales grew by 1% organically yoy to € 53.8m (eNuW: € 55.8m), below expectations due to a weaker-than-expected Christmas season as high inflation weighed on consumer spending among fashionette’s customer group. Hence, FY 2022 revenues arrived at € 165.8m (7% organic growth yoy) at the low end of the € 165-175m target range.

Adj. EBITDA remained slightly positive at € 0.5m in Q4 (eNuW: € 2.5m) due to higher-than-expected promotional activity. As a result, adj. EBITDA arrived at € 0.5m in FY 2022, slightly missing the € 1-4m target range (eNuW: € 2.5m).

Importantly, operating cash flow came in at € 2.3m in FY22, implying an excellent € 8.3m in Q4, effectively converting its inventory to cash (€ 7m cash inflow in Q4). With that, FCF should have been positive at € 1.2m in FY 2022 (eNuW) despite the challenging market environment. Consequently, net debt should have improved to € 8.4m (eNuW: € 8.3m) compared to € 16.7m in Q3 and € 8.7m end of FY21.

The weaker-than-expected top- and bottom-line suggests that fashionette is not immune against general macro weakness and high promotional activity in the fashion retail industry. Still, strong cash generation should provide confidence into the company’s business model and liquidity situation. In fact, financing is not seen to be an issue as financial liabilities mature in 2026e and do not bear any covenants.

Meanwhile, fashionette’s new major shareholder The Platform Group looks set to play an active role shaping fashionette’s growth trajectory by transferring its eCom know-how with regards to tech, data, marketing and logistics. fashionette should benefit from cross-selling across The Platform Group’s ecosystem, operating online platforms across 16 verticals in Europe. In fact, CEO Benner aims to establish a capital-light online luxury platform, thanks to attractive unit economics in the category and catch-up potential with regards to online penetration. All of this is seen to lift meaningful synergies at fashionette, which should support the company’s profitability in the mid-term.

BUY, new PT € 21.00 (old: € 22.00), based on DCF.