Forecast missed: Home 24 does not achieve the goals

Home 24 can crisis.

The online furniture retailer has been confronted with difficult situations several times in its twelve-year history.

Shortly after the IPO in 2018, overly optimistic expansion plans were pursued, and shortly thereafter an unsuccessful software conversion caused a drop in sales and dissatisfaction among customers.

With the corona pandemic, the company then got the upper hand, like many other online retailers.

Bastian Benrath

Editor in Business.

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But while many customers curled up at home during the first lockdowns and were very interested in new furniture, the effect last year was the opposite: the softer the corona restrictions became and the more activities such as travel became possible again, the less furniture was made bought.

This affected furniture retailers both online and offline: Even market leader Ikea had to report a 3.2 percent drop in sales in Germany in the last financial year, which ran until August.

The much smaller Home-24 group, on the other hand, was able to increase its sales by 27 percent to 615 million euros, as can be seen from unaudited business figures presented by the group. However, the company undercut its own forecast, which had announced growth of 28 to 32 percent. On the stock exchange, investors therefore sent the Home 24 share plummeting, losing almost 11 percent on Tuesday. With a price of just over 8 euros, it was as cheap as it was last in mid-2020, which means that it had given up almost all of the corona-related increases. Compared to the IPO, the paper has even lost more than 70 percent.

The main reason for this were problems at the Brazilian subsidiary Mobly, which achieved sales of 114 million euros.

In view of high inflation in Brazil and a difficult consumer climate, it grew by only 21 percent and thus burdened the group result.

There was also a loss in Brazil, while the European business, centered around the German-speaking countries, is profitable.

At group level, the operating result before taxes, interest, depreciation and amortization amounted to one million euros.

"We can scale our business profitably"

CEO Marc Appelhoff spoke in an interview with the FAZ of "positive stress" that he is currently experiencing. "With 80 percent growth in the last two years, we have proven that we can scale our business profitably," he presented his interpretation of the figures. It is now a matter of looking ahead and tapping into the growth potential of the furniture trade, which is still characterized by analogue technology. According to him, 85 percent of all furniture sales continue to take place in a brick-and-mortar store, and that is where we need to start.

The takeover of the home decoration chain Butlers, which Home 24 announced shortly before Christmas, should help. This not only brings more than 100 stationary branches into the network of the group, which previously operated almost exclusively online, but also an expansion of the range: While Home 24 previously only sold furniture, Butlers now brings in glasses, vases, cushions and other accessories for the home . For Appelhoff, this also has the potential to get its customers to shop more often: "It's about staying in regular contact with customers, not just the occasional large-scale furniture purchase."

So that both brands can benefit from each other, furniture from Home 24 will be on display in Butlers branches in the future, and some larger locations will even be expanded to include their own Home 24 showrooms. Since Butlers achieves significantly lower sales than Home 24, the relationship in the group is still right, says Appelhoff. "With less than 10 percent of consolidated sales, we make ourselves less dependent on online growth," he says. But that doesn't change the goal of making Home 24 the first address for furniture on the Internet. Stepping into the pedestrian zones simply opens up "another strategic option". Home 24 expects the approval of the antitrust authorities for the takeover by the end of February, which should then be completed by April 1st. Appelhoff sees no reasons that could speak against approval.

With regard to the currently sluggish Brazilian business, the CEO points out that the group took Mobly public last year and has only held 51 percent of the company since then.

But he doesn't want that to be understood as a preliminary decision for a complete sale.

Brazil continues to be a very interesting market, which is just volatile.

"Every two years, Brazil is the worst country to be in and then the best again," says Appelhoff.

The situation will be observed, but the IPO has gained flexibility: If Home 24 wants to invest more in Europe, it will be relatively easy to part with the Brazilian business.