Q1 according to plan: margins up, top line to follow

Margins up notably. Adj. EBITDA rose by 44% yoy to € 9.1m, a 2.7pp yoy higher margin of 8.5%, thanks to interaction of several effects: (1) the higher private label share drove up gross margin by 0.2pp yoy to 51.5%, a stronger margin increase was counteracted by higher container costs, (2) efficiency gains in fulfillment visible in a 0.9pp yoy lower fulfillment ratio, (3) the phase out of last year’s brand awareness and subsequent lower marketing costs led to a 0.9pp yoy lower marketing ratio and (4) lower overhead costs with G&A expense ratio down 1.4pp yoy.

Looking ahead, the product assortment change is seen to show similar top-line effects in Q2 and partly still in Q3, thus making FY’25ea transitional year. However, in FY’26e sales momentum is seen to pick up again (eNuW: +10% yoy) driven by more active customers due to country expansions (LUX, DK and SWE completed, 7 more to come) coupled with higher average basket sizes thanks to the assortment change. Naturally, this should come with positive operating leverage and efficiency gains, which should drive margins and cash generation in FY’26e accordingly.

Against this backdrop, WEW’s shares seem mispriced, in our view, trading at 17% FCFY’25e (28% ’26e). The anticipated return to growth coupled with further margin expansions in FY'26e could trigger a re-rating soon. Therefore, we confirm our BUY recommendation with an unchanged PT of € 18.00, based on DCF.