Op. turnaround in full swing, entering third phase; BUY

FCF generation confirms the strong fundamentals. Free cash flow after lease payments stood at € 23m (€ 39m operating cash flow) raising the company’s cash position at the end of the year to € 91m. With this, Westwing can easily finance its ongoing share buyback (from 02/26: up to € 8m) and upcoming charges for outstanding stock option programs (up to € 10m impact).

FY26 guidance reflecting short-term noise as well as increasing European traction. For FY26, management expects sales to grow by 5-10% yoy with ad. EBITDA of € 36-48m. Growth expectations comprise positive implications from last year’s country launches as well as the recent UK market entry (i.e. strong int. sales growth) but also increased cautiousness in Germany (increased savings rates amid rising energy prices). On adj. EBITDA, the guidance includes headwinds from lower order volumes, increasing freight costs and increased marketing expenses for the UK entry. Mind you: The lower ends imply no significant changes vs current momentum throughout the year.

Turnaround case remains in full swing. Since 2022, the current management successfully turned Westwing into a profitable growth case, visible across KPIs. Adj. EBITDA margin grew from -1% to almost 10% in FY25, thanks to right-sized operational structures, reduced complexity, increased focus on its premium assortment (Westwing Collection GMV share from 34% to 64%) and structured entry into new European markets. With this, the company looks well on track to deliver on its mid-term targets of continued high single-digit (eNuW) annual sales growth and an adj. EBITDA margin greater than 10%.

Valuation remains attractive in light of the healthy balance sheet and the company having reached a pivotal point of sustainable profitable growth and cash generation. Current market pricing of 4x EV/adj. EBITDA FY26e does not adequately reflect that, in our view.

We confirm our BUY rating. Despite lowered adj. EBITDA estimates for the short-term, the PT remains unchanged at € 23.50 as we lower the WACC to 9% as we consider the operational turnaround as completed and the group has entered the third phase of its transformation strategy “Scaling with Operating Leverage”.