windeln.de publishes 9M/Q3 2018 financial results: progress on restructuring, cost structure improved

 In 2018e

Munich, November 8, 2018: windeln.de SE (“windeln.de” or “Group”), one of the leading online retailers for family products in Europe and to customers in China recorded revenues of EUR 78.5 million in the first nine months (9M) of 2018 (9M 2017: EUR 142.1 million). Revenues in the third quarter (Q3) 2018 amounted to EUR 22.2 million compared to EUR 23.5 million in Q2 2018 (Q3 2017: EUR 47.2 million). Adjusted EBIT amounted to EUR -16.0 million in 9M 2018 (9M 2017: EUR -16.0 million) and EUR -4.9 million in Q3 2018 compared to EUR -5.9 million in Q2 2018 (Q3 2017: EUR -4.5 million). The Group implemented efficiency and profitability measures in February this year, which included streamlining the international business and focusing all European shops on margin improvements as well as lowering overhead costs. windeln.de has made good progress on these measures in 2018, accepting a lower but more sustainable revenue base.

Revenues development in Q3 2018 reflects lower sales activity during summer months

Revenues in the DACH region (Germany, Austria and Switzerland) amounted to EUR 18.3 million in 9M 2018 (9M 2017: EUR 34.2 million) and EUR 5.7 million in Q3 2018 which is an increase compared to EUR 5.3 million in Q2 2018 despite the typically weaker summer months (Q3 2017: EUR 9.9 million). DACH accounts for approximately 23% of Group revenues in 9M 2018.
Rest of Europe (RoE) outside of DACH, mainly the countries of Spain, Portugal and France covered by the Bebitus shops, contributed to approximately 25% of Group revenues in 9M 2018 or EUR 19.4 million (9M 2017: EUR 30.3 million). Q3 revenues for RoE were EUR 4.7 million in Q3 2018 compared to EUR 6.6 million in Q2 2018 due to the continued focus on improving product margins (Q3 2017: EUR 10.6 million).
After the challenging Chinese market environment in Q2 with severe customs delays, windeln.de participated less in promotions on Tmall in Q3 until it could guarantee a smooth customer experience again. As a result, revenues in China in 9M 2018 were at EUR 40.9 million (9M 2017: EUR 77.7 million) and with EUR 11.8 million in Q3 2018 only slightly higher than in Q2 2018 with EUR 11.6 million (Q3 2017: EUR 26.8 million). This accounts for approximately 52% of Group revenues in 9M 2018. The Group expects a significant increase in sales in Q4 due to major sales events in China (“11.11” and “12.12”).
Improvement on product margins and cost structure
windeln.de managed to further increase product margins for European shops due to the continued optimization of assortment and product pricing. On a consolidated Group level however, gross profit margin (as % of revenues) at 23.4% in 9M 2018 and 22.2% in Q3 2018 was lower than in the previous year (9M 2017: 25.5% and Q3 2017: 25.7%) due to price promotions in the DACH region (e.g. introduction of “Top Deals” promotions) in order to reduce inventory levels.
Fulfilment costs of EUR 13.3 million in 9M 2018 and EUR 3.5 million in Q3 were lower than in the previous year (9M 2017: EUR 21.0 million and Q3 2017: EUR 6.7 million) but higher as % of revenues due to lower volume. Marketing costs at EUR 3.6 million in 9M 2018 or 4.7% of revenues and EUR 1.1 million or 4.8% in Q3 2018 were lower than the previous year due to the focusing of marketing expenses (9M 2017: EUR 7.0 million or 4.9% of revenues; Q3 2017: EUR 2.1 million or 4.4%). As a result of the implemented restructuring measures, the Group shows significant improvements in its cost structure. Other SG&A costs are significantly below previous year, amounting to EUR 17.7 million in 9M 2018 (9M 2017: EUR 24.2 million) or EUR 5.3 million in Q3 2018 (Q3 2017: EUR 7.9 million) which is again lower than in Q2 2018 (EUR 5.8 million). Main reason is the lower headcount: since beginning of the year, windeln.de has reduced Group headcount from 387 active full-time equivalents (FTEs) to 218 FTEs as of September 30, 2018.
EBIT improved to EUR -17.7 million in 9M 2018 compared to EUR -24.4 million in 9M 2017. Q3 2018 EBIT amounted to EUR -5.2 million compared to EUR -5.4 million in Q2 2018 and EUR -7.3 million in Q3 2017. Adjusted EBIT amounted to EUR -16.0 million in 9M 2018 compared to EUR -16.0 million in 9M 2017. Q3 2018 adjusted EBIT of EUR -4.9 million could be improved compared to EUR -5.9 million in Q2 2018 and EUR -4.5 million in Q3 2017 (EUR -5.4 million including Feedo and pannolini). The Group’s target to reach adj. EBIT break-even in early 2019 is subject to the recovery of the Chinese business, further progress on margin improvement at the European shops and continuation of lowering the SG&A cost base.

Net working capital improved, cash burn reduced

Due to the focus on an efficient inventory management, net working capital at EUR 6.8 million as of September 30, 2018 was significantly lower than at the end of the previous quarters (June 30, 2018: 9.2 million and March 31, 2018: EUR 19.1 million). The Group’s total cash available is EUR 13.0 million as of September 30, 2018; total change in cash was EUR -4.1 million in Q3 2018.
CEO Matthias Peuckert states: “We continue to follow our restructuring path on the basis of profitable revenues. We managed to create a more efficient organization in the past few months and target to achieve sustainable and profitable growth after the current phase of stabilization. The market environment in China has been challenging but we are working hard on growing our Chinese business.”

Select key figures for the first nine months of 2018

9M 20189M 2017Q3 2018Q3 2017
Revenues (EUR million)78.5142.122.247.2
China40.977.711.826.8
DACH18.334.25.79.9
Other European Countries19.330.34.710.6
Operating Contribution (EUR million)1.78.20.43.4
in % of revenues2.1%5.8%1.8%7.1%
Adjusted EBIT (EUR million)-16.0-16.0-4.9-4.5
in % of revenues-20.5%-11.3%-22.2%-9.6%
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