Westwing Group SE (WEW) Earnings Call Transcript & Summary

Hello. Welcome to the Full Year 2019 Earnings Call for Westwing. I'm Stefan, Founder and CEO of Westwing. I have with me on the line Florian, our outgoing CFO; and Sebastian, our incoming CFO. With that, after the disclaimers, let's dive right in. I think the topic on everybody's mind and we would like to address first is the evolving coronavirus situation. We will update in detail during the call but just a few sentences upfront, high level. Number one, we have started on -- working on this topic 6 weeks ago with a dedicated task force. We have focused on our team members' health, first and foremost. Most office workers by now are working in home office, and we have our team helping. Number two, we are open for business, and we are delivering to our customers. Number three, we do not see any top line effects as of now. We're continuing in line with expectations. Number four, we do see some warehouse and supply chain issues but nothing majorly disruptive yet. And of course, the situation is rapidly evolving, and we are taking all actions necessary. I'll give some more details later on in the call. Now to the Q4 and full year 2019 results. We were again profitably growing in Q4 with a revenue growth of 12% and an adjusted EBITDA margin of 3% and a positive free cash flow of EUR 8 million. We saw clear improvements from a weak H1 throughout the second half of the year into Q4. Our operations were stable and cost efficient. Our marketing was scaling well. Our International segment is back to growth and our Private Label share is increasing well. We increased active customers by 23,000 in Q4 to 949,000 based on strong seasonal offering and continued loyalty of our customers. Yet, we also had some lowlights mostly driven by the first half of the year. The full year 2019 growth was only 5% with an adjusted EBITDA margin of only minus 4%. We saw slightly increasing churn in DACH, and we saw a lack of operating leverage for the year to the investments -- due to the investments that we did at the beginning of the year and actually the end of the year 2018. Our cash efficiency remains very strong. Our net working capital continues to be negative, and our cash balance is at a very strong EUR 73 million at the end of the year. The focus for 2020 will be on more customers, first and foremost, because we have the business model rolled out; number two, on cost discipline as it's important for profitability; number three, on rolling out further our Private Label; and number four, the silently running operations; whereas number five, I think in the recent weeks, to mitigate the coronavirus impact has become the clear #1 priority, and we expect to test as a clear #1 priority throughout the year. In terms of financials exactly, group revenue in 2019 grew by 5% to EUR 267 million. And in Q4, we had a 12% growth to EUR 88 million. And adjusted EBITDA went to a negative minus EUR 10 million for the full year, minus 4% adjusted EBITDA margin, but as you can see from the Q4 numbers, already better than the Q4 in 2018 at 3% adjusted EBITDA. And that, I think, is what highlights for us what is Q4. Q4 is mostly about demonstrating that we're back on track and that we improved and actually are now stronger than we were in the Q4 of 2018. Where do we stand today? And there's kind of 2 versions of that. One is that version, which is still true, but then there's the whole corona situation, which I will address next. We have 949,000 active customers growing quite well in the fourth quarter. Our warehouse footprint is now stable, the new Poland warehouse running smoothly and full capacity. We are not planning any new warehouses or moves for 2020. Our marketing at the higher 9% cost ratio is running well. We have increased the marketing investment to that ratio, and we do see very good paybacks within 15 months overall. And our organic marketing continues as our main focus, asset building, and in these times now more than ever as people are at home and increasingly using social media. International came back to growth. Italy problems have been addressed, and our International segment is at 41% of the group revenues in Q4. Our Private Label, which is our most important strategic initiative, was at 24% group share plus 8 percentage points year-over-year, so a massive growth. The Westwing Collection, which is most of that, is loved by our customers, and we see high margins for strong profitability. In fact, you're going to see later in the detailed financials our increasing Private Label share is translating into good gross margins and good contribution margins. Yet, of course, single-digit growth is too low for our ambition. We're not back at fundamentally double-digit growth yet, and we need that to gain operating leverage and win the market, and that's still the target. SG&A costs have been addressed. We have centralized our France club business. Italy has been restructured, and we have done complexity and cost reduction in the headquarter. Our loyalty model remains intact with more than 80% of orders from repeat customers, yet we saw churn slightly increasing through the year, especially in DACH. We're addressing that. And I think most importantly, in these times, cash is king when there's a disruptive macroeconomic environment, and I've never been more happy with our very strong cash position of EUR 73 million at the end of the year. We're internally, already before this crisis, focused a lot more on cash flow as adjusted EBITDA now with IFRS 16 and all the things that are around technology capitalization is not very insightful actually. So we focus mostly internally on cash flow, and we're really happy to have this strong cash. In terms of coronavirus, let me give you some detailed comments on what we are seeing, what we are doing. So what we are seeing is obviously, there's lockdowns and limitations in many of our regions -- most of our regions by now, yet the trade of goods is not yet impacted, and we continue to deliver to customers. Top line impact so far is very limited. We did have -- like for instance, when the first lockdowns came in Italy, we had a weekend where top line was a little bit lower in Italy, but it's on track again. And the company throughout the last weeks has been performing pretty much on plan and our expectations. We think that's -- there is some effect that people are more at home, so there is a positive effect on e-commerce. Also, people are more at home, so there's positive effect on Home and Living, yet obviously, there's also a negative effect of insecurity right now and people focusing on essentials. We are not at all sure where in the end this will play out and how this will play out for us. But right now, what we're seeing is top line is exactly on expectations. We also see supply chain is starting to be impacted slightly by delayed deliveries from China. We have a roughly 10% direct exposure to China, so that's not huge. But we do also see ripple effects in European suppliers by now, and we expect that to continue for the coming months. Because of 5,000 suppliers overall that we work with, we're probably not as exposed and can change from the supplier to supplier because also our suppliers have overstock right now because their retailers are not reordering, and they see their foot traffic in their own stores fall. In addition, we see unclarities across the supply chain, I think everybody sees that, and potential shortages in the future. There's a huge uncertainty and unclarity about future developments. Yet so far, what we're seeing, at least in our business, is less disruptive than what we see in the news. What are we doing? We have had for several weeks already a senior leader task force led by me to coordinate all activities. We've been very early in addressing our team's health. The safety of our customers, teams, partners has been our utmost priority. We started going partially to a home office several weeks ago already and are now with our office workers in vast majority in the home office. We have limited travel. We have moved meetings to video conference, and the company continues to operate. We are stocking more buffers on inventory, so we released approximately EUR 5 million of cash to prevent shortages on inventory. The good thing for us is that we know from the bestsellers where -- which we stock because mostly, we don't stock, right? So in our Private Label business and our permanent assortment business, we do stock. And for that, we released EUR 5 million to buy more bestsellers. We are also establishing alternative sources for out of risk -- out of stock risk products, and we're aligning with suppliers all the time. And currently, our buying teams and our sales teams, especially in the daily themes business, are daily aligning and switching from suppliers that currently have stocked to maybe suppliers that currently don't have but in a few weeks might have. So that's the good thing about our business is that we can daily adjust. In terms of operations, we're developing some fallback options. We have a decentralized operation setup with 5 warehouses. So for instance, France orders that might have previously built for is from Italy, we have rerouted from Poland. We're focusing more in our offering on cocooning and the at-home trend because people are more at home right now. So as I said, that should be beneficial to our business, and we can react very short term and are doing that right now, part of the reason probably why top line is exactly on expectations despite everything that's happening around us. We think long term, the stores remain closed longer. Or in general, if the mood of the population changes towards going to private stores and if people stay more at home in general, which is probably the reality, then there might be a very positive case for us where we're seeing business underlied by good trends. But of course, the general economic uncertainty and any potential logistics disruptions, the Polish border were also closed for goods flows or if a warehouse were to temporarily shut down, that would obviously have an effect on us. And with that, we are very happy that we have capitalized for EUR 73 million cash on the bank, no net debt, no debt at all at the end of 2019, and we could emerge quite well after potential crisis because even in an extremely likely scenario of no revenue for many months, we would be still afloat. So while we stand comparatively strong right now, we're very aware of the risks. The situation is rapidly evolving. We are adding and we will add further measures as appropriate. And for now, I think the comment and the situation is we're doing okay. Going on, you saw the news about our management team a few weeks ago. So just to reiterate, this is our executive team. You've met some of them during the IPO road show. Been highly committed for many years. We're long-term focused on the Westwing mission. You see everybody on the executive team is with the company at least 5 years, many since founding. And we continue to be very committed to building a company that we believe, especially in these times, is important. Our mission is to inspire and make every home a beautiful home. And even if there are some pathos in that in these times, I think that's never been more true. And what we hear from customers is that they appreciate inspiration at home and that they are at home right now and making it more beautiful is important. That's what this executive team stands for. So in terms of recent changes, Delia has started her maternity leave a few days ago, has stepped down from the Management Board into a regular employee contract. Due to the legal kind of framework in Germany, she cannot be a Board member during this time. We expect the maternity leave to take 6 months. In addition, Sebastian, who's on the call, will become CFO and a member of the Management Board. Sebastian has been with the company since 2014, has worked in leadership roles in the DACH business, in the Private Label business and, most recently, as Florian's deputy as CFO DACH. Before he was a CFO at the German [ mittlestand ] company, he was an investor, and he worked at Bain & Company for a while, where we got to know him. He's a great guy, and you'll get to know him. Sebastian will be taking over from Florian, who we thank for his service, who will pursue other interests going forward. In addition, Andreas has consolidated responsibilities. We have combined our Private Label and permanent assortment businesses together because we believe that's the best way now to further drive Private Label share gains as well as reap cost efficiencies. Andreas has been the founder of the Private Label business and built it into a huge business by now. So we're looking forward for him to take over those combined areas. And Michael, who has been with the company since 2013 and most recently founded the permanent assortment business, has become COO of the group and responsible for most operations. That's the team. We're very committed. And with that, let me quickly give you a few offering themes. I'm going to be very short because, obviously, right now, other questions. We are continuing to inspire and we did in Q4 inspire our customers. As always, seasonal great brands presence were a big topic. White -- the color white was a big topic. Cooking and decorating is a big topic. So that continues, and we're continuing to release new product, beautiful Own and Private Label products, for instance, the 3-seater sofa Solomon from our new Westwing Collection for EUR 1,599, a gorgeous product; the vase, Latona, which I also bought for me, for EUR 39. These are the products that we think, when people are more at home, are more exactly what people want. We launched our Westwing Collection Spring/Summer 2020 a few years ago -- a few days ago. The inspiration was to design very distinctive pieces, which transform in every room, beautiful materials as always. So that's what we're doing on the offering. And now let's look into 2020. So the key focus areas for the business, and I'm talking about the first 4, first and foremost, and then the coronavirus. So number one, we want to get more customers. We have rolled out the business model. We have our business model of daily themes, permanent assortment, Private Label and organic marketing now rolled out into all 11 countries. We have built the cost to do that. We have a relatively high SG&A cost base, and that's great because we're delivering a great business, and it's also great because that will scale very well as we grow and put more customers into the system. So it's not only having more customers will not only be great for growth but also will be a key driver for profitability going forward. Number two, cost discipline is important. As I said, we have rolled out the business model, so there's no need to massively invest anything right now. We actually expect SG&A cash cost to slightly decline through the year based on the actions that we've already taken. And cost discipline, obviously, in a macroeconomic environment, as the one that we're entering right now, is even more important. Private Label, high-margin business. Customers love it. It drives distinction. It drives traffic. It drives everything that we want. It will continue to be the key priority in driving Private Label share from the, right now, approximately 25% towards the 50% in the mid to long term. Silent operations running is important, but right now, it's basically adjusting also to the new reality. So mitigating the coronavirus impact is, I think, by now our biggest priority for the year, just making sure that we continue every day to inspire our customers who are more at home, be it on social media, which we believe is now a bigger asset than ever. We have more than 3 million people following us in Instagram, and we're ramping up the content that we're showing to them massively right now. We're changing our offering every day. We're sending a newsletter every day to customers. And we think the offering will be key to drive positively the business throughout this crisis. In addition, we have to keep the operations running, both on the office side. So everybody is in home office, most of everybody, and it's working quite well because we've been prepared for that already for some time; and keeping our logistics running. Obviously, there's a risk that at some point, our warehouse temporarily shuts down, the borders get temporarily closed if something happens. We can deal with that. But obviously, there is the impact if that were to happen, right? So with that, our guidance is subject, I think with almost all companies right now, to further development of the coronavirus situation, which might be good or bad for us. So revenue growth of 5% to 10% for 2020 and adjusted EBITDA moderately better than in 2019 and positive by 2021. With that, I hand over for the financial details to Florian.

Thank you, Stefan. As you know, today is my last earnings call as CFO of Westwing, and I want to take this as an opportunity to thank you, our shareholders, our analysts and our other partners, for your trust and good collaboration over the last years. I'm looking forward to handing over my duties to my trusted colleague, Sebastian, who is with us on this call. I will now dive deeper into our financials for the fourth quarter and for the full year of 2019. We had 12% of revenue growth in the fourth quarter of 2019, so we could continue the improvements already shown in the third quarter, and we were thus much better than in the first half of the year. To some extent, the growth in Q4 benefited from the strong GMV in the late Q3. For the full year, we finished with only 5% of revenue growth at EUR 267 million of revenue, and this was dragged down by the weak performance in the first half of the year. And in total, this is also clearly below our ambition level. When we look at the segments, we saw good recent developments in both of them. In [ DACH ], the business was growing with 18% in the fourth quarter of the year, resulting in 14% growth for the full year. And International has returned to growth, and we also saw much better performance in Italy. On our customer KPIs, we keep improving. We had 949,000 active customers by the end of the fourth quarter. This is the number of people who made at least 1 order in the last 12 months. After some weakness until summer, the number of active customers is now increasing again on a quarter-by-quarter basis since Q3. In the last quarter, we were able to add another 23,000 active customers. As you have heard before, further increasing the number of our customers will also be a key priority for this year, and this will help us to drive profitability and growth both at the same time. On the share of wallet, the GMV per active customer over the last 12 months, we increased to EUR 327, so by 5% compared to the prior year. And the average basket size and order frequency remained stable compared to a year ago. On adjusted EBITDA, we were able to reach 3% in a profitable growing quarter in Q4. We were happy that for Q4, we could also improve again compared to the prior year. Again, note that Q4 is our seasonally strongest quarter. When you look at the results of the full year, they were at minus 4% of adjusted EBITDA, and that was very much driven by our weak first half of the year. We see there's recent improvements in both of our segments. In DACH, we achieved 7% of adjusted EBITDA in Q4 and were thus breakeven for the full year despite the weak start of the year. And in International, we also saw clear improvements in the Q4. Now we will look into the drivers of the profitability in detail. So when you look at the drivers of our adjusted EBITDA margin, you see the result of our hard work over the last months, and that allowed us to significantly improve in the third quarter already and then even more in the fourth quarter. I will now focus on the development of the fourth quarter compared to a year ago as the full year was very much driven by the challenges in the first half of the year. Our adjusted EBITDA margin we improved by around 1 percentage points in Q4 over Q4. The improvement was very much driven by strong gross margin improvement of 4 percentage points, and that was based on a variety of initiatives. So for example, we have increased our Private Label share by 7 percentage points to 25% in Q4. We selectively improved our pricing, and we also did a good job of selling stock that was already written off. And then based on improved logistic costs, we could transfer this gross margin increase almost entirely down to the contribution margin level. On marketing, we actually expect to be in a similar level going forward of around marketing -- of 9% marketing ratio. And when we look at the SG&A, we expect our SG&A costs in absolute terms to remain roughly stable in 2020 with the baseline being lower towards the end of the year, and we'll do that based on cost discipline and several initiatives made. And then we will also see, again, operating leverage going forward. Internally, we look very much at SG&A cash costs and that's costs not influenced by depreciation, amortization and capitalization. And these costs, we expect to go down for the year based on, for example, cost and complexity reductions that we have already started in the business. And for example, that's the cost cuts in our Italian business, that's the combination of our Private Label and permanent assortment organization, as Stefan mentioned before, and a few other things. When we look at it in total and overall, we had a really strong improvement in profitability again. Cash. Our business continues to remain very cash efficient. Our net working capital remained slightly negative at minus EUR 3 million, and our CapEx ratio remained very low at 3% of revenue. Our cash efficiency is also reflected in our cash position and the actual cash flow. By the end of 2019, we had a very strong net cash position of EUR 73 million, and as Stefan already mentioned, this gives us much confidence to deal with whatever comes over the coming months and in particular, with regards to challenges related to the coronavirus situation. We are also happy with our free cash flow and its development. We finished the year with minus EUR 22 million of free cash flow. Our cash flow started weak in the first half of the year with weak EBITDA and then also some investments into the working capital. And then in the second half of the year, our cash flow was positive. That was driven very much by strong Q4 results as well as by a higher attention on the working capital management, especially on the inventory side. Regards to the breakdown of our free cash flow that you can see on the right side now, you see that a key item in the bridge from the adjusted EBITDA is our investing cash flow, which was mostly capitalized technology costs. And going forward, we expect this pattern to stay similar so that our free cash flow margin is roughly 3 percentage points below our adjusted EBITDA margin. So in summary, we look back to a strong fourth quarter with significant improvements made. By now, we have addressed most of our underlying challenges. And with Westwing being again in a quite strong position, it feels also like a good time to hand over my responsibility as CFO to Sebastian Säuberlich as the new CFO, who is already with me on this earnings call. Again, many thanks. And we are now open for Q&A.

We will now take our first question from Volker Bosse from Baader Bank.

Volker Bosse, Baader Bank. Congratulations on a strong performance in the fourth quarter. I have a couple of questions. First of all is what the current number of Instagram followers. You always mentioned that, but today, you did not. So what is the update here? What was the growth here? And how did the conversion from followers to customers proceed also in the fourth quarter? And perhaps you can give us an update on measures which you have implemented in order to improve this conversion rate from followers to customers. Second question, active customer growth plus 2% is somewhat subdued, I would call it. So also here, what's your action planned to stimulate, to motivate active customers to order more or to win more customers, also benefiting from the staying-at-home situation in the moment? And a more general question. I know your focus is on Private Label, but my observation by receiving your daily news is also that you broaden your branded product offer. For example, today, you have LEGO toys on offers. What's the background here? Do you see an increasing interest of brands to sell more on Westwing, so to increasing interest of the brands to open up new distribution, online distribution channels for them? Or is it driven more by you, that you are interested to broaden the offer in more product assortments which are not strongly related to Home and Living as initially planned?

Thank you. So addressing Instagram followers, we just didn't publish it because it's not a key metric that we publish. But I can tell you, at the end of the year, it was 3.2 million followers, up from 1.2 million followers at the end of 2018. So we continue to massively see Instagram followership across our channels increase, and it continues to be the key channel. And we actually think given people now more at home, it will be even more important for us because people are a bit more bored because they're not going out anymore, they're not going to the movies, et cetera, so they're spending more time on their phone. So we're ramping that up. How are we converting followers into customers? There's no -- I think we -- it's always very hard to measure the exact metric because Instagram doesn't give us tracking, and we cannot put an Instagram follower in direct relationship to a customer in our database. So -- but what we see is if follower count increases, we also see our customer -- new, first-time customer increases. And so that has been a focus throughout the second half of the year to make sure that people are not only following us but then also subscribe to the newsletter and then become customers. So that's our typical journey. It's not kind of follower and then customer but first follower and then kind of sign up for the e-mail news they receive, the e-mail newsletter, for some time and then become a customer. And that's been developing quite well. I think that leads me directly to your comment on active customer growth not being where we want it to be because we also want it to be higher, and that's the key focus for this year. We need to make sure that all the interest that we see in Westwing converts to more customers. And key measures there are, for instance, a real-time offering that is focused on what customers want, working with even more interesting marketing partners on social media especially, working much better to get our availability. There was some -- we talked about churn slightly increasing in that. One reason for that was that in our path towards a better contribution margin in the second half of the year, we also went a little bit overboard on having very tight stock on some of our best sellers. And so the availability in our permanent assortment was not where we wanted it to be. And fixing availability and making sure that our bestsellers are available is one of the key things that we want to do this year, also that's why the buffer stock that we increased with the coronavirus situation. So there's a gamut of things. I think just generally, we feel that we are in a much better position. For instance, first half of the year were kind of -- there were a lot of things not going well, like gross margin was not where -- what it should be. The logistics were -- had a big problem. We had too high costs, et cetera. And a lot of that has been addressed. Our focus for this year can be really -- like we feel the business is set up in a good way. We can focus now a lot on increasing the conversion of interested people into active customers because once they become active customers, even if churn has slightly been increasing, it's still extremely good compared to most other e-commerce businesses that we know. And so driving new customers and making sure that more customers are in the company, like on the site and shop with us, is a key priority. So the action plan is driving up conversion rates through a gamut of activities. One of those -- yes?

The last one, last word.

Through a variety of activities so, yes, availability, more brands, intelligent pricing, real-time offering that focus on what customers need, publishing or releasing new products, et cetera, et cetera. And one of those activities also, as has always been in our daily themes, we've always worked with brands. And what we offer to brands is a unique opportunity to be featured in an editorial environment and not just to sell. So we're increasingly in the last year focused on pushing this message to customer -- to suppliers because when we started Westwing, I always wanted it to be an editorial marketing platform for brands, but we were very small, so it was very hard to convince them. So it was an upward, uphill battle. Well, now we actually do see that more brands are starting to understand how they can use Westwing not just as a sales channel but also as a marketing channel, which is great for us because then they give us better products, they give us -- like what LEGO gave us, like a really cool new release, but we can feature them with great content across social media on our site, et cetera. So we do see that more brands are interested. And then in the recent weeks, actually, in the last couple of weeks, we've actually seen several brands reach out to us that might have been a bit subdued because now they are seeing their foot traffic in their either own retail network or from the retail partners that they have in the off-line world, a stall or fall or whatever you want to say. And we are obviously open for business and can push them in a way that most other sites cannot. So here, we believe that our editorial shoppable magazine-driven very unique business model is a unique partnership possibility for a lot of brands. And right now, our buying team is reaching out to -- the German buying team, I think, this week is reaching out to around 100 brands that we've already talked to, where we either want to increase our business or where we think they would now reconsider doing business with us given the situation.

[Operator Instructions] We'll now take our next question from Graham Renwick from Berenberg.

Three questions from me. Firstly, you mentioned revenue is in line with your expectations in Q1 so far. Does that mean it's been running at 5% to 10%, in line with your full year guidance? Just wondering how we should think about the development of that guidance through the year. And looking beyond 2020, when we're thinking about modeling long-term growth, is 5% to 10% sort of the new normal we should be modeling going forward? Secondly, you've also mentioned no impact from the coronavirus so far, which is great. But Italy is 15% of the business. It has been heavily disrupted for a few weeks and most of Continental Europe has been disrupted for nearly a week. Could that actually start to indicate that maybe your business and online generally is actually a lot more resilient in this sort of environment? Because we have seen some data in the U.K. the online sales being very strong, a lot stronger even though store sales have been massively in decline. And are there any sort of snippets or stats you could share just to give us a sense of how customers have been behaving in that environment? How have customers been engaging a lot more with daily themes while at home? Has traffic been stronger than you expected? So anything you could give -- I know it's early days, but if you just give us a sense of how customer behavior could develop, that would be useful. And then finally, do you think there will be some disruptions to the creative teams who have to now work individually at home? I remember when visiting your HQ, it's clearly a very collaborative environment, a very close-knit team. Just wondering if the creative processes that you have there could be quite difficult if everyone is having to work remotely. So sort of any comments you have around that would be great as well.

Sure. So I think let me actually start at the end and do that question first and then work my way through. So one, we were worried about that, too, if the creative teams can work well. But actually, it's surprisingly well because they do a mix of the following. So what we actually did, we gave people also cameras for their home, and then we're doing actually some of the meetings in like a video conference mode, including everybody looking even at papers. I got a picture from one of our creative directors sitting in her living room in front of all the printouts that you also saw when you visited the office. So -- and then because of video conferencing being so high quality right now, actually, the -- and we have set up all our teams with that ability -- well, team members, I mean. It's actually working quite well. And what we see is that the creative spirits are -- especially in this time of like tension and change, are actually flowing rapidly. We have -- our creative team is overflowing our sales and buying teams right now with new ideas that we can't actually all execute because they're so good. So we don't see that yet. I think there will be a heavier strain on team members to collaborate creatively over the weeks, but I think that's the new reality. We will adjust, and I'm not worried at all because they are so far doing it well. And there's an advantage. Our team members are quite young, so they're adjusted to that. And we see actually a good fighting spirit and very well spirits in the company, I think also helped by that we actually started pretty early compared to other companies. When we started putting some people into home office, people were still calling us crazy and we're overreacting. But we actually started 3 weeks earlier to putting people step-by-step into home office and already, 1.5 weeks ago, went into vast majority in home office. So we're not seeing that. Number two, any tidbits or kind of what we can see from the coronavirus. We see it's a bit choppier, right? So our -- like as I said, when -- immediately when the lockdowns were in effect in Italy, we saw the weekend afterwards were like 30% lower traffic. But afterwards -- sorry, lower revenues, traffic actually remained. But like a couple of days later, it returned back. So we are seeing that there is some form of resilience there. I think -- now I'm interpreting, but you asked for my assessments, so I'm giving you that. I think there's kind of a bridge. So what we see is that customers probably, on average, buy less, but they are more looking at their home and then buying more. You know what I mean? Like there's both effects. There are just like, of course, insecurity and economic insecurity, but people are at home, and people are now sitting there and looking at their furniture and their rugs and their decoration all the time, so it just becomes a higher need. And I think just more generally, I think what you will see, not just in online retail, let me get to the segment, general and retail categories is a bifurcation of things that massively increase like obvious things is health, hygiene and groceries for short term, right? And then you have some -- maybe even midterm because we run on restaurants. And then you have this travel is going basically to 0. And then there is -- all the other categories are in between. And I think home is more on the side of that, that will increase simply because people are at home. I mean I cannot express this in any -- like there's no more complex logic to that, I think, because what we also see as a good example of how we think about it is in the winter when people are more at home, we see higher revenues. And in summer, we see lower revenues as people are not in their home. We think we have the opposite effect now. People are at home all the time, so revenue should increase. And then the second thing is online. I think there's a general trend towards online with customers that don't want to go into stores anymore if they are even open because everybody is afraid. I cannot get an AmazonFresh appointment in the next week here in Munich. So -- and we are seeing that customers are just continuing to buy. We don't have detailed analysis, but I can tell you that we're in line with the expectation that we set. And the guidance for 5% to 10% of the year, obviously, we -- forget the corona thing. We were guiding conservatively after having missed our guidance in the last year. And we know that for us as a management team, it's important to deliver actuals and not to win with guidance right now. So you can assume that our plan is not only lower end of that guidance, and you can also assume that we're currently well within that performance. Again, disclaimer, this could change, right? I mean we don't know how customers react. But for now, we see our top line holding. And then the last question, 5% to 10%, is that the new normal? We don't hope so. We clearly don't expect so. Otherwise, we -- probably all of us who are working on the executive team for that long time, we have equity at 5% to 10% permanent growth, that would not be a very valuable company. So we are clearly focused on driving more growth. But we are not focused on guiding or projecting right now more. So I think the way for you to model is the decision that you have to take. We think that long term, we can go to 20% based on the macroeconomic like focus on more online shopping and based on our work. But for this year, we're guiding 5% to 10%.

Okay. That's very clear. Just a further question, if that's okay. I was just wondering, what is your current sort of protocol if someone was to get coronavirus in one of your distribution centers? Or what would be the risk? Or have you done any stress testing in case any government forces you to shut down a DC, which means you can't actually generate revenue, you can't deliver orders? Have you sort of thought about those sort of extreme scenarios because I guess they could be possible?

They're real. They're real. That can happen. That can happen. I mean the honest answer is like that every distribution center in Europe, possibly in the world, is currently at risk for being shut down. I mean it would be an illusion to say that that's not the case, but you can do things, right? So what we're doing is if someone -- we're measuring temperature at the entrance. So if someone has heightened temperature, we're sending them away. So you basically try to avoid someone who's sick actually entering the warehouse. And so far, we do have people sick. I mean you have people with flu all the time. So far we have avoided them entering the warehouse. And if that happens, then at some point, you might have to shut down the warehouse for 2 to 3 weeks to kind of disinfect it, put everybody in quarantine and then you reopen. In our business, as we don't have next-day delivery, we don't have fresh groceries, I think we would obviously have a kind of a temporary revenue shortfall because we cannot ship. But our orders might actually kind of -- as we see in Italy, might continue, we don't know, right? If there is a kind of 3 months shutdown of a whole region for some reason and we can't even get goods out, I think there's no plan B for that in general. But there's a plan B that we could then try to fulfill the orders from the other warehouses. But yes, there's -- a DC being closed or the borders being closed even for goods flows, that would be the worst case. Is that likely? I don't know. Like in this situation to talk about likelihood, I think all the things that are happening right now, just 2 weeks ago, if I told you like we were prepared for this and that to happen, you would have said, okay, these guys are nuts, right? So we don't know. Like we're preparing, and we have everything that we think we can do in place, but there might be things that we cannot control, right? And that's the reality of it. But in the end, it's also comparative to other businesses. I think people are ordering, and we keep shipping because in the end, the economy will not completely come to a standstill for an extended period of time. Someone has to ship something. That's what we believe.

[Operator Instructions] We'll now take our next question from Matthew Garland from Citi.

My first one is obviously linked the coronavirus impact. I know, as you said, it's difficult to know what the possible impacts would be. But obviously, in terms of your SG&A costs, how much of that can be variable or not? So I know obviously, you're looking for leverage on it. But in a worst-case scenario, I suppose how much of that would you be able to cut back is my first question. Second question, obviously around availability. So I know that you spoke about obviously investing into higher inventory. How long are those kind of core lines with that inventory last year and in terms of the kind of disruptions that you're seeing to the supply chain, what's the extent that delivery times have increased? And then just finally, in terms of your point around the possibility of greater online penetration and these sort of things, would you think about investing in marketing above the kind of 9% level to take -- well, not to take advantage but to get out -- to get the brand out to customers even more than you are now? Or do you think that 9% level is kind of fixed and is where you think it could stay?

Yes. Let me address the last one first. We're not expecting to increase. I think this is a cash-first scenario. I've been through the 2008 crisis when I was at Bain with some of the clients. And I don't think like even if you want to be aggressive, you're not -- I don't think this is a time to increase marketing budget, at least not for our business. We might even decrease if the situation becomes more -- like, let's say, there would be a distribution center closed temporarily, we might actually take down marketing spend a little bit. And in the case of what you mentioned that if, let's say, there's positive support from like macroeconomic trends or customers being more at home and ordering much, much more, then in the end, given most of our marketing is still focused on organic, we would see that in organic first, and we actually could cut down on paid even more, right? So in the end, we don't see a scenario where we invest over the plan into marketing. This is not a time to do that. We believe that. And if there's positive developments, we will benefit with our organic marketing more, and that's exactly why we built the organic marketing the way we built it because it's asset building and assets. We can even leverage like kind of crisis mode or something like that. We could still -- people will still be on Instagram and follow us, and we can still generate most of the effects that we have in marketing. So that's great. We're very happy with that. Number two, availability, where we are, et cetera. So the good thing in our business is we're not -- neither our goods are perishable nor are we heavily trend focused in the bestsellers that we have on stock. The trend focus is in the daily themes, that's on a reservation model, so that's very different. But the things that we put on stock is not trends-based and it's not perishable. So what we have done, typically, we have like 3 to 4 months of inventory of some of our goods and it varies by product category, depending on how the supply chain is, et cetera, but I'm giving you a high level kind of estimates, right? And with the EUR 5 million, we can increase that by 1 to 2 months. And that's good. Will there be disruptions? Of course. There's going to be products that we cannot get. Let me give you an example of what we're doing in that case. So for instance, we have sofa, one of our bestseller sofas, it's produced in Poland right now. And that's actually not affected, and that was actually quite good. But then we found out that the fabric actually comes from China. So there was a problem. So what we did is that our buying team was looking for a new fabric together with a supplier. We found a fabric supplier in -- no, I don't know the country but somewhere in Europe. And now we changed the fabric, which is the exact same spec fabric. And now the sofa, which is done on demand and not on stock, the sofa was like off-line for 2 weeks, but now it's back on. And we're doing that all the time with a lot of our bestseller products. So if this is not available from the primary source supplier, they're trying a secondary source supplier. If the primary source supplier, a secondary source supplier have problems in their back supply chain, we're trying to help them to find other suppliers, sub-suppliers. And if that -- none of that works, that's a good thing in our business model, then we can push other things. We're not committing to inventory that kind of gets out of trend or something, then we just get more stuff that we already know will sell and we get it from a different supplier. So yes, there will be effects because all of what I described is choppiness, right, so it's not like a smooth process. That's a very manual and worked by our team process, and they're doing a fantastic job there. But we neither expect it to be smooth, nor do we expect to be very bad, somewhere in between, right? And then comparatively to others, and that I think will be very important throughout the next month, customers will look for something. Then the question is not necessarily do you have the -- in a scenario where everybody has great availability, like Q4 last year, you have the best offering, no, but are you better than the other offering that's on the market? And there, I think we have a good chance with our 5,000 suppliers and all the network [ retail ]. And then on the SG&A cost, let me give you the extreme version of the answer to your question. So what would happen if we have a no-sale scenario, right? No sales, like no restructuring measures, like -- just like everything drops to 0, but we continue the company like it is. So given the cash cost, we have a cash cost of SG&A cash cost roughly -- or total cash costs of roughly EUR 9 million per month, like EUR 5 million SG&A, EUR 2 million in marketing, EUR 2 million other fixed cost. Almost none of that is immediately cuttable, right? So our marketing, we can cut the paid, but that's not a big part. Of our SG&A, most of that is team or a rent, et cetera, we can't cut that. But that's EUR 9 million. We have -- at the end of the year, we had EUR 70 million. So we can survive several months. Even in that extreme like scenario, we can survive half a year or longer, right? So we think we're perfect -- I was never happier -- like we had some questions last year if we should do a bigger buyback because we did this buyback, which we had to do because we needed shares to give out to our software -- to option holders, right? And then some investors have said shouldn't we do more, and a lot of them cautioned us not to do more. And thank God, we didn't do more because right now, I feel the cash balance is what gives us strength to go through the -- this crisis, not unscathed, I think nobody will, but as good as possible and then possibly be able to leverage any positive wins that come from customers being more at home. And then we can do -- sorry, and there's the other -- yes, and then other -- of course, as I said, in this scenario of no sales and no restructuring, if there would really be no sales for several weeks, of course, we would have to do something, right? But it's not that we can just close our SG&A cost up and down. We're discussing certain measures that we can do also according to German legislation and that some of those might be very helpful in such a scenario, but none of that is right now kind of active or pending.

[Operator Instructions] It appears there are no further questions. So I'd like to hand the call back to our speakers for any additional or closing remarks.

Thank you very much, everyone. I think I have no other closing remarks apart from, everyone, stay healthy, stay safe. Business is important, but I think health is more important, and I think we'll get through this. Thank you very much, and speak to you soon.