Healthy Q1 results underpin that Westwing was able to continue the trend of yoy GMV growth witnessed in recent quarters. Q1 sales increased by 6% yoy to € 109m (eNuW: € 107.7m), showing an acceleration of growth versus

Q4 (+2%

yoy

), driven by

growth in active customers (+2% yoy to 1.28m) and basket size (+9% yoy to € 185). International and DACH grew 3% and 8% yoy, respectively, implying continued market share gains amid ongoing challenges in the German online Home & Living market (-4% yoy).

At the same time, efficiency measures are bearing fruit. Adj. EBITDA arrived in line with expectations at € 6m in Q1 (eNuW: € 6.5m), representing a margin improvement of 0.8ppts yoy to 5.8%. This was carried by a strong contribution margin expansion of +4ppts yoy to 32%, a favorable product mix (i.e. higher private label share, +5ppts yoy to 51% of GMV in Q1), reduced fulfilment expenses (-2ppts yoy) as well as lower G&A costs (-1ppts yoy) as a result of cost savings (i.e. consolidation of logistics and warehouses and streamlining the organization).

Notably, Westwing was able to translate the favorable adj. EBITDA development into healthy FCF of € 4m in Q1, supported by net working capital of € -18m, likely concluding the reduction of excess inventory built up during Covid.

Westwing confirmed its FY24 guidance and with sales expected to develop within a range of -3% to 4% yoy to € 415-445m (eNuW: € 442m). While the Q1 performance was overall satisfactory, management continues to expect H2'24 sales to be weighed down by a strategic adjustment of the product offering in Spain and Italy (low to mid single-digit percentage impact) along with ongoing challenges in the home & living market as consumers continue to hold back on higher-value products such as furniture. The adj. EBITDA outlook was reiterated at € 14m to € 24m implying a 3.1 to 5.8% margin (eNuW: € 23.7m with a 5.4% margin). Considering € 6m adj. EBITDA in Q1, the bottom-line guidance looks achievable, in our view, while FCF for the full year should likely be close to break-even (eNuW: € 0.3m) due to one-off restructuring costs (i.e. complexity reduction, SaaS transition) and normalizing inventory patterns.

Overall, Westwing has adapted successfully to the current transition period towards a leaner and more scalable organizational setup. While visibility on a return of consumer confidence remains low, Westwing’s mid-term prospects continue to look bright driven by the structural shift towards e-commerce and its unique positioning in the European home & living market. We reiterate our BUY recommendation with a PT of € 18.00, based on DCF, and keep the stock on our Alpha List.