Verkkokauppa.com - Struggling with margins

Verkkokauppa.com’s Q3 earnings fell short from our estimates, while revenue growth topped the estimates. Top line grew by 9.1% to EUR 141m, gross profit remained steady y/y at EUR 20.9m and adj. EBIT amounted to EUR 4.7m.

• Net sales topped our estimates (EUR 139.7m) and grew by 9.1% y/y to EUR 141m, driven by all business segments.
• The strategic growth area, B2B, grew strongly by 22% in quarter. Growth came from the customer segments of large as well as small and medium sized enterprises. The export business returned to the growth path once travel restrictions were relieved, and export sales increased 4.5% during the period, representing 6% of total sales. The company succeeded well in converting many online visitors to regular buying customers during the comparison period, with an improvement of conversion rate.
• Gross margin was 14.8% and fell below our estimates (16.5%). Gross profit ultimately amounted to EUR 20.9m and was on the same level as in comparison period. Gross margin was affected by tightened competition in lower-margin categories like phones, computers, and home appliances. Also, the share of low-margin products was increased in Q3.
• Adj. EBIT was below our estimates (EUR 6.8m) and was mostly affected by tightened gross margin. The EBIT saw a decline of 17% and amounted to EUR 4.7m (margin of 3.3%).
• Adj. EPS amounted to EUR 0.08 (Evli: EUR 0.12) and saw a decline of 15%.
• The company guides EUR 570-620m revenue and EUR 20-26m adj. EBIT for FY ’21 (unchanged)

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