Vente-Unique (EPA: ALVU)

Vente-Unique (EPA: ALVU) is an online seller and marketplace of furniture and home furnishings in Europe. FY 2024 revenues increased 10.1% to €178.65 million from €162.25 million in FY 2023. The business is headquartered just outside of Paris, France.

Before moving on I just want to note that finding information on this business was tough for a host of reasons:

• Most of its filings are in French, including its Annual Reports.

• It’s a small cap business that doesn’t have a lot of press or coverage.

• There isn’t a ton of chatter about it on social media and what information is out there is almost exclusively in French.

• Management and IR don’t seem super promotional.

• This is a very boring business.

History

Vente-Unique was founded in 2006 by Sacha Vigna who remains CEO to this day. Its core market is France but operates/sells in ten other European countries. Per its homesite, those countries are Spain since 2008, Germany since 2010, Belgium since 2012, Switzerland, Austria, and Luxembourg since 2013, the Netherlands since 2016, Italy since 2017, Portugal and Poland since 2018. Vente-Unique claims to have delivered to more than 2.5 million customers since its founding. The business went public in April of 2018.

Vente-Unique is a subsidiary of CAFOM Group which is also publicly listed in France. Per its homesite, CAFOM owns a collection of furniture and appliance distribution brands and businesses along with a musical instrument store. I am not sure when CAFOM acquired Vente-Unique or if it was some kind of financial partner when the business started back in 2006. Per TIKR, CAFOM owns ~63% of Vente-Unique’s outstanding shares.

CEO

As stated above, Sacha Vigna is the CEO of the business and has served in this role since at least 2017. Per the FY 2023 Investor Presentation, linked here, Mr. Vigna has 20+ years of e-commerce experience and co-founded the business with Hervé Giaoui. Mr. Giaoui also serves as the CEO of CAFOM and Chairman of the Board of Directors of both Vente-Unique and CAFOM.

Executive Compensation

I was unable to find any concrete information on Mr. Vigna’s compensation in the publicly available documents. Morningstar did not have any information on his compensation either.

Per TIKR, management owns ~10% of the business in addition to CAFOM’s ~63% ownership stake. However, I was unable to confirm this via their publicly available filings in English.

What Does Vente-Unique Do?

As stated above, Vente-Unique slings furniture and home furnishings in 11 European countries. It also operates a marketplace where third parties can sell their items on Vente-Unique’s website. Regarding the marketplace, I was unable to find what its take rate is.

The business sells everything from couches and chairs to electric fireplaces, wine racks, fans, kitchen sinks, faucets, desks, bathtubs, front doors, garage doors, entry/exit gates, pool tables, spas, saunas, and even treadmills. I mean they’ve got all kinds of stuff. Seems like one of those businesses that has a little bit of everything.

What’s Unique About Vente-Unique?

This was a tough question to answer. The best and only information I found was in the FY 2023 Investor Presentation referenced above.

Capital Cycle

It took me a while, but I finally got around to reading Capital Returns by Edward Chancellor this summer. I highly recommend it. His Capital Cycle framework is nifty, and I think about it now when analyzing businesses. For those who haven’t read the book, he breaks an industry’s capital cycle down into four stages:

1. New competitors, attracted by high returns on capital, enter the industry.

2. Competition lowers investment returns below the cost of capital.

3. Investment in the industry declines and firms close or consolidate.

4. Less competition means high returns for the winners/survivors. The cycle reverts to Stage 1 where new competitors enter the fray.

So what, who cares? Why does this apply to this business? Funny you should ask. Vente-Unique posted this slide in the FY 2023 Investor Presentation.

Per Google Translate, these headlines state that Ikea is lowering their prices, Maisons du monde, a furniture retailer and competitor in France, is having difficulties, Cdiscount’s results have dropped, and it continues to restructure, and ManoMano, an ecommerce competitor, had to reduce its workforce by 25% due to weakness in its core DIY market. These are just headlines, but they do point towards this industry being somewhere in Stage 2 or 3 of the Capital Cycle.

Profitability

This brings me to my next point. Why would the movement of the industry from Stage 1 to Stage 2/3 not be too concerning for Vente-Unique. In the same presentation it states that it is the most profitable company in its sector. This is me projecting a bit here, but the furniture business is a tough way to make a living. Margins are low and competition is high. I can’t imagine it’s much different in Europe. Berkshire’s Nebraska Furniture Mart and other furniture businesses are the exceptions to the rule. Vente-Unique really deserves some credit here. The business is doing something right if it remains the most profitable player in a very low margin industry while competitors are facing difficulties.

Customer Service

The third differentiator is customer service. Slide 9 from the presentation referenced above is shown below.

Three of Vente-Unique’s competitors have so-so to below average Trust Pilot reviews. Granted this is from one source, but these reviews come from thousands of users. The slide also highlights two more competitors who have gone out of business.

The following slide in the presentation is shown below and highlights the quality of Vente-Unique’s customer service.

Its Trust Pilot rating is excellent at 4.3/5. Judging based on the languages in the red boxes above, it has also won customer service awards in France, Spain, and Germany in the past year.

Additional customer satisfaction ratings are highlighted proudly on its homesite. I’ve screencapped them below.

Unique Asset

Per the investor presentation linked above, Vente-Unique is the only pure-play online furniture retailer listed on the Euronext markets.

Reaching Out to Investor Relations

I yearned for more qualitative factors on what separates this business from the competition. One investor presentation wasn’t reassuring enough. I reached out to the IR contact, heard back, and sent over a list of questions about qualitative and competitive factors that I thought of. I ended up hearing back from IR yesterday and my questions were answered. What was not made clear was whether the business was okay with me sharing their answers or not. I followed up about this and will post the Q&A at a later time or update this writeup if or when I get the all-clear.

Valuation

Revenue

Vente-Unique’s revenue growth and segmented revenues are shown in the screencaps below. The data were taken from TIKR.

Revenues have CAGR’d at 11.03% since FY 2012 and ticked down ever so slightly to 10.9% since FY 2018 which is when the business went public. Management only provided revenue figures for FY 2024 in the most recent investor document, so I’ll have to wait for the rest of the financial data in the annual report that should come out in January of next year. On to the segmented revenues.

The segmented revenues show that the business has been able to pivot into the rest of Europe successfully and lessen its reliance on its home market. Northern and Eastern Europe CAGR’d its revenues by 15.43% between FY 2017 and FY 2023. Southern Europe CAGR’d its revenues by a robust 21.54% over the same timeframe.

Vente-Unique trades at 0.72x FY 2024 revenue given its current market capitalization of ~€130 million.

Capital Structure

The asset side of Vente-Unique’s balance sheet is shown below. The data were taken from TIKR.

The eyecatcher is the sizable increase in Net PP&E. Not being able to read French really leaves me in the dark here as I cannot tell what caused the increase. I’ll need to follow up with IR on this matter if/when I hear back from them. None of the other line items give me cause for concern.

The liabilities and equity side of the balance sheet is displayed in the screencap below. The data were taken from TIKR.

The only item of note on this side of the balance sheet are capital leases which ticked up considerably from <€1 million to €17.07 million. Again, I’m in the dark here. My hunch is that it relates to the increase in PP&E on the asset side, but I’m not 100% sure.

Real Free Cash Flow (RFCF)

Vente-Unique’s real free cash flow, defined as cash from operations minus stock-based compensation minus CapEx, is shown in the screencap below.

RFCF CAGR’d 37.6% between FY 2018 and FY 2023. That’ll make any investor salivate. We’ll see what RFCF looks like when the business reports full results after the new year.

Vente-Unique trades at ~7.7x FY 2023 RFCF given its current market capitalization of €130 million.

Returns on Invested Capital (ROIC)

Vente-Unique’s ROIC are shown in the screencap below. The data were taken from TIKR.

You love to see a business that has been able to maintain high ROIC before and after going public. The differences between NOPAT ROIC and Net Income ROIC are due to interest expense, currency exchange fluctuations, and what TIKR says are “other unusual items”. I’m beating a dead horse here, but I’m in the dark on what those unusual items could be.

Returns on Incremental Invested Capital (ROIIC)

Vente-Unique’s ROIIC are shown in the screencap below. The data were taken from TIKR.

Per my analysis, Vente-Unique has been compounding its value by 10% - 13% since it went public back in 2018. Its stock price chart since the end of FY 2018 has been shown below and was taken from TIKR. Do note that FY 2018 ended on a Sunday, so the stock price chart begins on Monday, 10/1/2018 and goes through the present. Its stock price on 10/1/2018 was €6.70/share and its closing price as of 12/2/2024 was €12.95/share.

The screencap indicates the market agrees with Vente-Unique’s business performance as its CAGR of 12.6% falls within the value compounding range of 10% – 13%.

Risks

General risks – The risks associated with running a furniture business are numerous. Possessing knowledge about consumer tastes, pricing, supply chain management, logistics, competitors, inventory management and turnover, etc. are table stakes. You’d think one would be generously rewarded for this, but as I stated earlier, the entire industry is low margin. Furniture businesses generally aren’t too far from those Buffett talks about where management must perform a séance to keep the lights on.

Macro risks – Furniture spend is correlated to economic growth and prosperity. A sustained economic downturn, particularly in Western Europe, would be very hard on Vente-Unique.

Tailwinds

European furniture market – European furniture market is massive with estimates ranging from ~€100 billion to >€200 billion. This puts Vente-Unique at a miniscule share with plenty of runway to grow.

Capital allocation – Although I haven’t been able to figure out why yet, the numbers indicate that management is adept at capital allocation. This is reinforced by consistent profitability and the claim that Vente-Unique is the most profitable player in its sector.

Conclusion

Is Vente-Unique a great business? The numbers indicate that it’s a pretty good one. The valuation seems cheap at <1x FY 2024 revenue and <8x FY 2023 RFCF. Do I think it’s worthy of an investment? Not at this point. I don’t have nearly enough qualitative information to justify that. There’s just too much risk. To borrow from Albert Barese in the Sopranos, I’m in no position to go into the unknown not knowing. Just gotta wait and see with this one.

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Please reach out to me at possiblevalueresearch@gmail.com, @PossibleValue on Twitter and @Heshy on MicroCapClub with any comments, concerns or questions. Lastly, don’t forget to tell someone that you love them.

*** Remember that this isn’t investing advice. Consult a trusted financial or investment advisor before making any kind of investment decision. ***

Disclosure: I do not own shares in Vente-Unique.