fashionette released Q1 results, reflecting that fashionette remains one of the fastest growing eCommerce pure-plays despite a challenging market environment. Importantly, CEO Benner is seen to reposition the company, aiming for a platform transition starting in Q3 this year while at the same time unlocking efficiencies within the company. With its exposure to the structurally growing and highly profitable luxury fashion vertical, the company should be poised for profitable growth in the coming years.

Importantly, the 8% decrease in net sales in Q1 was exclusively driven by the discontinuation of beauty and smartwatches units. Organically, sales increased by 4% yoy in Q1 driven by dynamic active customer growth of 10% yoy to a new record high of 1.08m. Profitability was burdened by high promotions especially due to the discontinuation of beauty and smartwatches, explaining why gross margin decreased by 1.5pp yoy to 39.5%. Hence, even though CAC improved by 21% yoy to € 27.50, this led to an adj. EBITDA loss of € 0.5m in Q1 compared to € 0.2m in Q1 '22. Positively, FCF improved by € 4m yoy to € -7m in a seasonally weaker quarter, supported by more efficient inventory management.

fashionette confirmed its FY23 guidance of 5-8% net revenue growth yoy to € 173-178m (eNuW: € 176m, eCons: € 177m) already including a negative low double-digit €m effect from the discontinuation of beauty and smartwatches. In Q2-Q4, this requires a growth pick-up, which should be driven by the platform transition in H2. Adj. EBITDA is expected in the range of € 2-3m (eNuW: € 2.8m, eCons: € 3.0m), implying a margin of 1.4% at mid-point. This represents an improvement of c. 1.2pp yoy despite one-off restructuring expenses to the tune of € 1.8-2.8m. Management identified cost savings in marketing and admin functions (i.e. personnel), which should yield first positive results in H2.

CEO Benner confirmed the ambition to transform fashionette into a true luxury eCommerce platform in the mid-term. In September 2023, first B2B partners will be connected to the ecosystem and the number should rise to 150 until year-end. fashionette will also start to distribute luxury fashion (i.e. clothing). Operating online platforms across 16 verticals, fashionette should strongly benefit from cross-selling opportunities as well as The Platform Group’s know-how with regards to tech, data, marketing and logistics. Trading at 0.6x book value, the stock looks attractively valued and we confirm BUY with an unchanged PT of € 21.00, based on DCF.