Verkkokauppa.com - Towards online driven department store
Online pioneer Verkkokauppa.com has shown strong growth figures over the years and with its new strategy, the company targets strong, profitable growth by expanding to new categories and utilizing its strong online platform.
Strong track record
Finnish online retailer Verkkokauppa.com has grown at a CAGR of 11.5% (2010-21). The company has positioned well to the megatrend of online transition with its most visited and known webstore among Finns. By expanding its presence in low online penetration categories, the company aims to tap market share from the original brick-and-mortar stores. With a low OPEX base, the company is committed to executing price-driven business in price-sensitive consumer electronics markets while improving its gross margin through evolving product categories. With a strong brand, local warehousing, and fast deliveries the company aims to expand its 150,000+ active customer base.
Strategy execution has started well
Verkkokauppa.com renewed its strategy in 2021 and expects to reach a revenue of EUR 1bn and 5% EBIT margin by 2025. In Feb 2022, Verkkokauppa.com acquired a Finnish webstore e-ville.com. With the acquisition, the company gets an experienced sourcing team and new resources to develop its own brands. Moreover, the automated warehouse is in a testing phase and is expected to operate by the end of Q1’22. We expect to see some enhancements in efficiency during H2’22 since, with the new automated warehouse, the utilization rate of the rental warehouse decreases, and efficiency improves in Jätkäsaari warehouse.
HOLD with a target price of 6.0 (6.5)
Verkkokauppa.com’s peers have also experienced a decline in valuation multiples. Omnichannel peer group median is valued with a 22-23E P/E of 12-11x while Verkkokauppa.com is trading at 15-13x. We find the premium justified, given stronger earnings growth expectations. Even though we don’t see the war affecting Verkkokauppa.com’s business directly yet, the uncertainty limits potential returns in the short-term. We retain our HOLD-rating and adjust our TP to 6.0 (6.5).
Finnish online retailer Verkkokauppa.com has grown at a CAGR of 11.5% (2010-21). The company has positioned well to the megatrend of online transition with its most visited and known webstore among Finns. By expanding its presence in low online penetration categories, the company aims to tap market share from the original brick-and-mortar stores. With a low OPEX base, the company is committed to executing price-driven business in price-sensitive consumer electronics markets while improving its gross margin through evolving product categories. With a strong brand, local warehousing, and fast deliveries the company aims to expand its 150,000+ active customer base.
Strategy execution has started well
Verkkokauppa.com renewed its strategy in 2021 and expects to reach a revenue of EUR 1bn and 5% EBIT margin by 2025. In Feb 2022, Verkkokauppa.com acquired a Finnish webstore e-ville.com. With the acquisition, the company gets an experienced sourcing team and new resources to develop its own brands. Moreover, the automated warehouse is in a testing phase and is expected to operate by the end of Q1’22. We expect to see some enhancements in efficiency during H2’22 since, with the new automated warehouse, the utilization rate of the rental warehouse decreases, and efficiency improves in Jätkäsaari warehouse.
HOLD with a target price of 6.0 (6.5)
Verkkokauppa.com’s peers have also experienced a decline in valuation multiples. Omnichannel peer group median is valued with a 22-23E P/E of 12-11x while Verkkokauppa.com is trading at 15-13x. We find the premium justified, given stronger earnings growth expectations. Even though we don’t see the war affecting Verkkokauppa.com’s business directly yet, the uncertainty limits potential returns in the short-term. We retain our HOLD-rating and adjust our TP to 6.0 (6.5).