There are hopeful revolutions that slowly peter out. Cuba is such a case. What began as a self-proclaimed model for a socialist Latin America under the auspices of the USSR is now dragging along as a state economy wreck. Officially they still exist, the big goals, but in reality it’s about survival.
The furniture retailer Home24 is such a case in German e-commerce. When it was founded in 2009, the Samwer brothers’ sponsor Rocket Internet proclaimed a major upheaval. The large suburban furniture stores would soon become redundant – and Home24 would take over the online business.
Potential retail investors tried to persuade the Home24 makers to make a scary investment with such horror visions. Rewe took the bait and invested, officially to collect know-how in e-commerce. With a slightly vulgar television spot, Home24 explained to the target customers that their previously preferred furniture store was “in the shit of the world”.
And today? After the IPO four years ago, Rocket Internet – long since no longer a decisive player in the Berlin Internet scene – withdrew completely from the company. Rewe is also no longer on board and now prefers to pay its Internet tuition to the Flink fast delivery service.
Prudently: The world revolution on the furniture market has blown off. The furniture shipper drags himself along laboriously. Significant price gains during the pandemic period have long since vanished into thin air. The momentum is gone.
On Tuesday, the management lowered its sales target: Although the ailing decoration chain Butlers has also belonged to the company since spring, sales could even fall this year. The failure of the ambitions reads as follows in the ad hoc announcement: “The company is currently not in a position to give a reliable time horizon for achieving the communicated medium-term goal of one billion euros in sales per year.”
In the first half of 2022, sales fell by 13 percent to EUR 292.1 million compared to the previous year. Home24 justifies this with the difficult consumer climate. In addition, the previous year was particularly strong because of the pandemic – back then, people decorated their home offices while furniture stores were temporarily closed. The operating loss (EBIT) rose to 27.7 million euros in the half year. In the high-sales period of the previous year, the loss was 11.9 million euros. CEO Marc Appelhoff pointed out, however, that sales are still going much better than before the pandemic.
The stock reacted inconsistently – at the start of the stock exchange it fell significantly, but then turned just as clearly into the plus. Apparently, after examining the figures, investors were relieved that Home24 intends to at least maintain the targeted profit margin for the full year of one to five percent of sales – albeit before interest, taxes and non-operating costs (Ebitda). The bottom line is that there should still be a clearly noticeable loss.
Home24 can only achieve this with a savings plan. Instead of concentrating on growth – the long-term goal of one billion euros in sales – the focus is now on profitability, the company said. No wonder: the share has lost almost 90 percent of its value since the IPO. At the current price of a good EUR 3.50 per share, Home24 could only raise money on the stock exchange at unfavorable conditions through a capital increase. Currently there are still 66 million euros in cash in the till.
The stock market is looking closely at this number, emphasized the Jefferies analysts. They lowered their price target slightly to a smooth six euros on Tuesday, but still recommend buying the share. The analysts at Alster Research recently warned that Home24 is facing a difficult road ahead, but that the trend towards online trading is unbroken.
In order to save, Home24 reduced marketing expenses by a fifth in the first half of the year. In the future, new customer advertising should already pay off if a customer only orders once. Critics had previously complained that it was difficult in the furniture industry to calculate with repeat buyers – after all, furniture is not an everyday purchase.
The fact that Home24 is opening its platform as a marketplace for 110 third-party providers so far should also bring progress. There is also a new customer loyalty program. And the ex-adviser Appelhoff still calculates in his half-yearly presentation to the investors that an untapped multi-billion market is waiting for the company.
A comparison with the competition shows how far Home24 really is from revolutionizing the furniture market. XXXLutz, for example, has a turnover of 5.3 billion euros – almost as much as a euro as Ikea turns over in Germany alone. The two furniture giants have long been in the online business themselves – and use the combination of retail stores and e-commerce.
This has not gone unnoticed by Home24 either: After starting out purely as an online retailer, the provider has opened twelve showrooms over the past few years to show its furniture at Stilwerk, for example. There are also four outlet stores for returns and leftovers. The acquisition of Butlers for around 59 million euros in cash and shares adds further potential furniture retail space.
However, competition is also increasing online: Otto.de has long since discovered furniture in order to differentiate itself from Amazon. eBay also wants to focus more on decorative goods in Germany – an area in which Home24 is increasingly pushing through the takeover of the chain Butlers, which has since gone bankrupt.
This puts Home24 in direct competition with Westwing. Rocket Internet also launched the decoration provider as a sister company to Home24. At Westwing, however, business is no better: Here, too, the pandemic gave the share a steep rebound, only to crash again just as quickly.
The revolution fails.
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