Westwing Group SE

XETRA:WEW

Earnings Call Transcript 2021-Q3

[Operator]

Dear ladies and gentlemen, welcome to the earnings call of Westwing Group AG. At our customers' request, this conference will be recorded. [Operator Instructions] May I now hand you over to Sebastian Sauberlich, CFO, who will lead you through this conference. Please go ahead.

[Sebastian Säuberlich, CFO & Member of Management Board]

Yes. Thank you very much, and good morning, everyone, and thank you for joining us this morning. I'm very pleased to be sharing details of Westwing's Q3 results with you today. Westwing's mission to inspire and make every home a beautiful home continues to resonate with our ever-growing community of customers across all our market, and we consistently inspire our customers for all the new. With our mission in mind, let's walk through the business highlights and financials for the third quarter of 2021. I will begin by providing key update of our business operations, followed by details of Westwing's financial performance in Q3. After brief summary, we will then move to Q&A.From a strategic perspective, Westwing has been delivering exceptional growth over the previous years and has come quite far in establishing itself as the leading inspiration-based Home & Living e-commerce player in Europe. The success of our business has continued over the last quarters, and we have also seen a fair amount of change in the macro environment over the summer quarter. We have seen an impact from the ease of social distancing restrictions across our markets as well as continued challenges resulting from supply chain disruption. At the same time, we have remained agile in response to these changing conditions, and have successfully navigated these turmoils by continuing to grow our business.Revenue for the third quarter of 2021 grew on top of a strong baseline to EUR 103 million, a 5% growth compared to Q3 2020 lockdown levels. This increase on top of an already high baseline from last year is a testament to our unique proposition as well as the ongoing shift in consumer spending habits towards online channel, particularly in Home & Living e-commerce. The global supply chain disruptions and higher container sea freight costs have had an impact on Westwing's profitability in Q3. Additionally, growth investments into our Westwing Collection, marketing and technology resulted in short-term and planned impact on overall profitability during the seasonally weak quarter.Adjusted EBITDA, therefore, for the third quarter amounts to minus EUR 0.4 million at a corresponding adjusted EBITDA margin of minus 0.3%. The mounting costs associated with supply chain issues also had a subsequent impact on the free cash flow, which stands at minus EUR 0.5 million year-to-date. We have fought against the supply chain volatility caused by the supply chain issues by investing into buffer stock, which has a temporary effect on our net working capital assets. We believe these measures were warranted to continue to provide our customers with our great Westwing Collection products in sufficient quantities and to prepare for the important fourth quarter.We continue to have a strong base of loyal active customers, which stands at 1.7 million for the last 12 months, a jump of 36% compared to Q3 of last year. The loyalty of our active customers is the backbone of our business, and this growth is indicative of Westwing's love brands attracts both new and old customers to engage with us again and again. Supply chain disruptions have had a cascading effect on many global markets. And naturally, we have also seen impact on Westwing's business. The ripple effects from the disruptions and the associated rise of sea freight container costs are expected to last for the remainder of 2021 and at least into the first half of 2022.While we had factored some of these effects into our profitability guidance for the full year, there is to be very transparent, currently a risk of further profitability compression caused by continued disruptions in the coming recent months. Important to highlight that we consider this a temporary external effect with no impact on long-term profitability level. But also, it has been a greater impact than we had predicted initially and even just a few months ago. The strategically important and high-margin Westwing Collection continues to gain momentum. And we are proud to be a 38% share of group GMV in Q3 2021. That's 12 percentage points up from Q3 last year. With this development, we are well on track towards our strategic long-term target share of 50% of group GMV.Our Westwing Collection leveraged the loyalty to our love brand with best sellers tailored to the taste of our customers at good prices and high quality. We also generate superior margins in our Westwing Collection range. So the success of this strategic initiative is a key driver of our continued profitable growth. And we are very pleased with the progress we have made so far. Lastly, we confirm the previously stated guidance for 2021. We expect revenue in the range of EUR 510 million to EUR 550 million, and we are firmly -- firm on this guidance. The guidance for adjusted EBITDA margin for 2021 is expected to be at the very lower end of the 8% to 10% guided range, with, as stated before, a risk for downward revision as we navigate the remainder of this year.As some of you might have realized on our social media channels, Westwing turned 10 years old this summer. As you can see on the chart, this has been a truly exceptional growth journey, reaching our current size of EUR 595 million in GMV on a last 12-months basis. We have grown our business by more than 100% since our IPO in October 2018 and are committed to our ambitious target of being a EUR 1 billion revenue and very profitable business by '24 - '25.With that, let me come to the details of the Q3 results. GMV for Q3 is up 5% compared to the previous year and stands at EUR 118 million. Sorry. Q3 is usually a weaker quarter across Home & Living in general and e-commerce in general. Consumers tend to enjoy the summer months engaging more in offline activities, such as travel and leisure. So Westwing's top line level shift against last year's extraordinary baseline is, in fact, truly notable. Compared to 2019, we see an uplift of 66%. Our growing GMV is complemented by a sizable increase of 36% in our active customer base compared to Q3 of last year, which makes us 1.7 million active customers strong.The global supply chain disruptions remains challenging. Here, I would like to provide you with more color on the impact we have seen on our business. The global cargo disruptions has materially pushed up global and maritime transport rate. There's also been a correlated increase in the price of some raw materials, which has led to further cost inflation. These challenges are affecting our business, just like many others across the globe, and we expect them to last at least into the first half of 2022. Resulting from these disruptions were several challenges that Westwing actively mitigated again.Firstly, the supply volatility caused bulk deliveries peaks from suppliers to deliver purchase orders [ compared ] leading to a significant rise in inventory, warehouse handling and storage costs. Order backlogs from the first quarter from several suppliers as an example arrived all at once in the summer, and our teams had to work very quickly to manage this large influx of inventory, incurring additional expenses, including renting short-term storage capacity. Secondly, sell-off of the inventory at lower margins to create storage space for our very best sellers and to optimize warehouse capacity also contributed towards lower profitability.Furthermore, our teams were taken away from core activities towards remediating actions, such as renting additional short-term warehouse space, managing container schedules, which had an impact on overall profitability. The good news is, Westwing was able to take the right actions at the right time. We preemptively invested into inventory to create enough buffer stock to ensure good availability for our seasonally strongest fourth quarter. At the time of supply volatility, I'm very happy to report that we expect to have very good product availability for the ongoing Q4.Additionally, through closer collaboration with suppliers and enhanced data sharing between our warehouse and supply teams, we are continuously improving our forecasting, reservation and capacity metrics, ensuring that we are stocking the right product at the right time. Still, the last month also showed that we must improve further here over the coming quarters. Lastly, we were able to pass on some of the cost inflation from container rates and raw materials consumer through further price increases as we already did in H1.These external challenges are likely to remain for the rest of the year and at least into the first half of 2022 and are expected to have an adverse effect on our gross and contribution margins through this duration. Consequently, we also predict a temporary increase in our structurally negative net working capital over the next quarters as we look to deliver upon the Westwing customer experience by securing stock and ensuring supply through additional inventory buffers and higher pre-payments.Let me provide you some details on the very positive development of our Westwing Collection business in Q3. Last year was clearly an extraordinary year with an unprecedented market environment, sudden surge in demand. Also for our uniquely created Westwing Collection product. As a result, we actually had not been able to increase our Westwing Collection share in Q3 of the last year, as our Westwing Collection product availability could not keep up with the sudden increase in demand at that time. This year, we were able to improve our product availability significantly again, and we're able to deliver tremendous growth in the Westwing Collection share, which now stands at 38% of overall group GMV.Our long-term targets to get this figure towards the 50% mark, which will be done through a combination of increased customer reach and awareness as well as expansion into further product categories. The DACH segment, like on many other metrics, is leading the way in Westwing Collection share adoption, showcasing the potential at 42% GMV share in Q3. Our focus remains on providing a great customer experience by ensuring good product availability at short delivery times during this uncertain times of stressed supply chains. And we are well prepared with adequate inventory levels for the seasonally strongest fourth quarter.With that, I would like to close the business update and move on to the financial update section, where I will share some further details on the financial performance of our business. No doubt that the lockdown conditions of the last year greatly benefited our top line figures. And the good news is that it was not a temporary phenomenon, but a permanent effect that is leading to even further growth. We see the trend of top line growth continuing even during this more normal period of Q3 2021, while consumer spend is again increasingly being shared with offline stores and activities such as travel. Still Westwing's top line level shift has continued.Revenue for Q3 2021 was EUR 103 million. That is 5% growth on top of last year's baseline. Growth was seen across both our segments in Q3, with DACH generating revenue of EUR 56 million and international generating revenue of EUR 47 million. On a group level, Q3 brings us to EUR 373 million in revenue for the first 9 months of 2021. This is a 35% growth compared to the same period of 2020.Let's look closer at the P&L for Q3 2021. Our gross margin for the third quarter came in at 49%, 0.2 percentage points behind Q3 2020. We have been able to adequately maintain our healthy gross margin levels despite higher sea freight costs and general cost inflation of raw materials. On top of passing on cost increases to our customers, the highly profitable 38% GMV share of our Westwing Collection greatly assisted us with upholding this figure at attractive level. At the same time, our fulfillment costs increased by 2.8 percentage points versus the previous Q3, which was mainly driven by higher warehousing costs arising from the distressed supply chains.As described earlier, we added inventory buffers as well experienced a high number of pipe deliveries from our suppliers, leading to increased inventory handling and warehousing costs. Such events also led to remediating actions, such as the rental of additional short-term wells in Spain. Overall, the collective effect of a stable gross margin coupled with the rising fulfillment costs resulted in contribution margin of 26.2% for Q3 2021, which is down 3 percentage points compared to last year. But compared to Q3 2019, we are still 6 percentage points better in contribution margin despite the current supply chain issues. So not only are we able to confirm a level shift on top line, but also our unit economics continue to be significantly better than at any other time in our history, apart from the exceptionally strong 2020 piece.In terms of marketing, we remain committed to investing significantly into our organic marketing model and support this through investments in brand awareness and effective performance marketing channels. Earlier this year at our Capital Markets Day, we committed to a marketing ratio of 9% to 11% over the next few years. And we remain confident that this focus on organic marketing investments will enable Westwing's ambitions of becoming a EUR 1 billion revenue company by '24 - '25. Our targeted growth investments are also now visible in our G&A ratio. We can observe that our growth investments, especially in technology and Westwing Collection heavily contribute towards the G&A ratio of 18%, which is 4.8 percentage points higher than last year.We believe by investing at this decisive time, we can truly take advantage of the pace we have gathered over the last several quarters to help deliver the ambitious targets we have set up for ourselves. Overall, this brings us to an adjusted EBITDA margin of minus 0.3% in Q3 2021. Important to note is that the third quarter is generally our seasonally weakest quarter. So the low profitability is not unexpected. Also, although it is a bit lower than we had initially projected. As absolute revenues ramp up again in Q4, we will also return to good adjusted EBITDA profitability in the final quarter of the financial year 2021. Our vision of our business remains unaffected by these short-term headwinds, and we continue to remain long-term oriented.Taking a closer look at profitability, we can see that year-to-date, group adjusted EBITDA is EUR 30 million, and hence, EUR 6 million ahead of previous year, with an adjusted EBITDA margin of 8% for the first 9 months, driven by the very strong H1 results. DACH continues to be profitable at 13.4% year-to-date, while international reported positive adjusted EBITDA of 1.3% year-to-date. Also on EBITDA profitability, you can see the level shift with the 2019 results, both on a quarterly view as well as year-to-date.Moving on to cash flows. As predicted and communicated in our last call, net working capital increased over the Q3 period. It currently stands at positive EUR 6 million, which is 1.1% of LTM revenue. The investments we made in ensuring product availability in response to supply volatility remain to be the key reason that our structurally negative net working capital has temporarily tipped into the positive territory. While we expect the net working capital to remain in the slightly positive range over the next quarters, the effect from the supply chain disruption dissipate, we are confident that we will return to our structurally negative net working capital position in 2022.Our CapEx ratio remains low at 3.6% of revenue, whereas the increase versus Q3 last year is mainly driven by investments into equipment for our new warehouse and our growing technology function with a focus on the development of proprietary software.Let me guide you along our free cash flow bridge to give you some color to the individual elements. As said, we're starting with an adjusted EBITDA of EUR 30 million. We then have first seen a significant impact of minus EUR 9.7 million from an increase in net working capital. As described earlier, the cash flow impact from net working capital is mainly driven by the higher investments into inventory and supplier pre-payments to mitigate against supply chain disruption. Alongside this, we have also had significant tax payments in the first 9 months of 2021.In total, we have so far paid EUR 9.2 million in income tax, but it's important to note that this includes tax payments for the fiscal year 2020 and mandatory pre-payments for the fiscal year 2021. So basically, as 2020 was our first year being tax profitable, we are paying for 2 years in 2021. For next year, we expect the tax payment to reduce again substantially. The investing cash flow of EUR 9.5 million in the first 9 months is in line with our expectation. Overall, this resulted in a free cash flow of minus EUR 0.5 million year-to-date, which we expect to turn positive again for the full year during our seasonally strongest fourth quarter.Based on the combination of those effects, our net cash position, as you can find on the next slide, stands at a strong EUR 97 million, which provides us with reassuring strategic optionality during this highly volatile time.With that, we move on to our revenue and profitability guidance for the full year. Revenue guidance for 2021 is confirmed in the guidance range of EUR 510 million to EUR 550 million. While Q4 to date, growth is in line with our expectations, it is important to note that the critical upcoming weeks in Q4, especially around the Black Friday weekend will mainly drive the overall growth results for the fourth quarter. And keep in mind that the Q4 last year was a quarter with heavy lockdown, so it's a very strong baseline.Coming to profitability. At present, we confirm our profitability guidance, but expect profitability at the very lower end of the previously guided range of EUR 42 million to EUR 55 million at a corresponding adjusted EBITDA margin of 8% to 10% due to the ongoing supply chain disruption. I would like to highlight that the ongoing global supply chain challenges may put the current profitability guidance at risk of revision in the coming weeks and months. The high level of volatility makes planning even for the short and midterm, quite difficult.Despite we discussed short-term challenges, our strategic targets for 2024 - '25 remain unchanged. As shared during our Capital Markets Day earlier this year, we are targeting EUR 1 billion of revenue by '24 -'25. We plan to be highly profitable with more than EUR 100 million in adjusted EBITDA by '24 - '25 and maintain our best-in-class cash conversion, which will enable the term cash flows. We believe we are well positioned to achieve these targets, led by our variety of brand ambition. We aim to be the most desirable consumer Home & Living brand for home enthusiasts.Today, I also want to take the opportunity to provide some more details how the path towards our targets will look like. I would like to emphasize here that these forward-looking statements and figures do not represent official guidance for 2022, but are an indicated view and are subject to change over the coming months while we are working on our business planning and continue to learn about Q4. We have deployed significant growth investments in 2021 to deliver on the target we had set for '24 - '25.We believe by investing into key areas of our business, at this time, we can take advantage of the size that we have gained and scale our business further to the next stage of our evolution to become a EUR 1 billion business, attractive adjusted EBITDA margins of 10% to 12% for '24 - '25. For 2022, this means that we will continue to prioritize growth investments over profitability to lay the foundations for our '24 - '25 target.As an offer of transparency, not guidance, but let me also share in some more detail how we currently think of 2022 financial. In terms of revenue growth, we expect the growth rate in the first half of 2022 will be similar to the growth rates we currently see in the second half of 2021, as relative growth will still be significantly impacted by COVID related baseline effects of H1 2021. For the second half of 2022, we expect much stronger growth rates again in line with the long-term growth targets we have set out, as we leave the extraordinary baseline effects behind us.In terms of profitability, we remain committed to positive adjusted EBITDA results and a positive free cash flow in 2022. However, due to our prioritization of growth investments and the expectation of ongoing supply chain challenges, the adjusted EBITDA margin will be lower compared to 2021. As we have promised, we remain long-term focused on the achievement of our '24 - '25 target of EUR 1 billion in revenue and more than EUR 100 million in adjusted EBITDA. And we will see steady improvement from 2023 onwards towards that [ core ].Before I now move to Q&A session, I would like to summarize the key takeaways from our Q3 results. Westwing realized EUR 529 million in revenue over the last 12 months at a strong 45% growth rate year-over-year. More importantly, we continued the top line level shift we achieved in 2020, a testament to the quality and value proposition of the business we run. Based on the strong top line development, we have so far generated EUR 56 million for adjusted EBITDA and an adjusted EBITDA margin of 10.5% on an LTM basis. As per end of Q3 2021, we served 1.7 million active customers and delivered 4.6 million orders across Europe in the last 12 months. Our strategically important Westwing Collection share came to an all-time high of 38% in Q3 2021.Now assuming out of Q3, let me give you the broader view of Westwing. The opportunity ahead of us remains massive. The Home & Living market has a size of EUR 120 billion, and it's still very early in e-commerce. We create superior loyalty base on our differentiating and inspirational core. Our Westwing Collection perfectly leveraged this loyalty and attractive margin upside. Based on this highly profitable consumer love brand strategy, we target a long-term profitability of 15% adjusted EBITDA. And lastly, our structurally negative net working capital and low CapEx ratio helps us convert these profits into very strong cash flows.With that, I would like to thank you for your attention, and I'm happy to take your questions.

[Operator]

[Operator Instructions] And the first question is from Volker Bosse, Baader Bank.

[Volker Bosse, Co]

Yes. Just one, Volker Bosse with Baader Bank. Thanks for the provided information, and thanks for the open words also related to '22 already. I would have 3 concrete questions. First one would be on freight cost expenses. I think the effects, especially trades from Asia to Europe. So to give us an indication, freight costs for your products are doubling, tripling freight forwarding or an idea here? And how much of your procurement volume is especially affected by these tremendous freight cost increase? Second question would be the supply chain constraints. My question would be other products not produced or not shipped due to container shortage issue or not produced because perhaps production facilities are closed or material are not available. So what exactly causes the supply chain constraints here, not produced or not shipped?And the last one would be on the fourth quarter '21. I mean, your full year guidance is still right, wide range, which means the door open for the fourth quarter double-digit decrease or a double-digit increase to reach the upper or lower end of the guidance, which, however, looking at the more [Audio Gap] producing this levels. Is it fair to assume that it's most likely that the sales momentum in the fourth quarter could decline again versus the third quarter? So that growth in the fourth quarter should come in like -- yes, below 12% sales growth to the best guess assumption.

[Sebastian Säuberlich, CFO & Member of Management Board]

Okay. Thank you, Volker, for the questions. I think the first one on the freight expenses. I think, yes, we mainly see that from Asia, China to Europe. And currently, we see prices not only doubling or tripling, but actually, we see the spot rates even higher than that. So factor 5 to 8 or something, depending on what you see. How much of that is affected? I think it's mainly affecting our Westwing Collection assortment that we saw from China. So that's roughly 1/3 of the Westwing Collection that we do from China. And by that, it has an effect on that. We estimate it's roughly that effect is somewhere around 2 percentage points on a group level, roughly, right?So there is a strong cost decrease. And also like most of our other suppliers are also having same supply chain structures as we do so [ call it ], it's kind of they'll see the same challenges. But it's already -- I kind of think it, we are hoping that it will relax a bit and also we went into longer-term contracts to mitigate some of this risks. Next question, I think, supply chain constraints. I think that's a mixed picture. I think there were times beginning of the year where there was no production capacity due to lockdowns in some of the regions. For example, India was heavily affected. And also, I think China still. So there were effects in terms of factories being closed or being slower in producing.And then kind of, as I said, in an effect, all of that arrived [ hit it ] then at the same time, so kind of increasing our in inbound needs and also our warehouse space needs. But we don't see a significant constraint in terms of product availability. It was more like, I would rather call it disruptions and constraints. So kind of there was like this rather chaotic effects of the first half year that we still see now coming into our warehouses. So -- but I think there's not -- there's nothing like that. They're just strong constraints. We see that for some third party suppliers, but they are also struggling with some constraints. But it's not the big thing. It's more kind of the disruption effects, I would call it.I mean and in Q4, yes, I think it's very hard to comment exactly on Q4, as you know, because we still see significant weeks coming in with Black Friday and the Christmas season that we see in the first weeks of December still. So I think it's still uncertain. We kind of saw the beginning of the quarter quite successfully. So in line with Q3 numbers. But again, I think it's too early to tell. And also, as I said, the baseline is very strong. So everything I would now -- I'd tell you might give you some confidence, but I think will not help you much. We would have love to have the crystal ball also.

[Operator]

The next question is from Christian Salis, Hauck & Aufhauser.

[Hans Christian Salis, Equity Analyst]

I've got 4 questions, please. First of all, could you maybe talk a little bit about the jump in Private Label sales and related decline probably in the third-party business, i.e., the daily themes model? Is there any issue here with the daily themes model? And then secondly, on the gross margin, could you please provide the moving parts here, i.e., freight costs? How much of the -- or how much would be the negative impact in Q3 from the freight cost on the gross margin, same on price increases? And what's really the impact of the positive mix effect from Private Label?And the third question, so now the low end of the EBITDA guidance in full year '21, so the 8%, that implies basically roughly 8% margin in Q4. So this is -- this implies a lower margin decline than in Q3. Yes, it's still down 8%, but now in Q3, you were down 11%. So kind of a sequential improvement, if you may. So what gives you confidence for this sequential improvement in terms of profitability? Is there anything we should think of in terms of sequential tailwinds compared to Q3? And then final question. Yes, what's been -- simple one. What's been the GMV growth in Q3 year-over-year? And could you also talk a little bit -- I mean, you just indicated that GMV growth so far quarter-to-date is more or less in line with Q3. So probably it's around mid-single digit, would that be a fair assumption?

[Sebastian Säuberlich, CFO & Member of Management Board]

Yes, thank you, Christian, for your questions. I think on the first question, yes, we were super happy with the increase in the Private Label sales, right? Because, as we said, that's kind of a strategic pillar driving also contribution margins, gross margins up. And we also believe that the Westwing Collection is the key differentiator towards our customers. And hence, the more people have those products, the better. I would not read from that, that we have kind of a problem in our daily themes.But it's fair to say kind of that given the seasonal effect of Q3 and also kind of the first, let's say, month of freedom that they had a slightly stronger impact on the impulse based part of our business. You can also see that in kind of that the AOV increase, that's mainly a mix effect of shifting towards the day -- the permanent assortment model that is then driving the Private Label sales. But I would not conclude a weakness out of that. It's I think is a more mix effect and actually also positive for us that we can deliver more [ single agent ] products to people's home.Gross margin. Yes, I think all of the facts kind of are evening out, so to say, right? So I think the Westwing Collection share brings us in roughly up that what we lose in the increasing supply chain costs. And if I had to estimate, right, I think it's both between -- it's both around 2 percentage points roughly. So 2 percentage points down on the -- with the sea trade and 2 percentage points up by Westwing Collection share gain and also price increases that we have seen. Q4, what makes us confident. I think you described it well.I think there are 3 levers for the Q4, sorry. The first one is we expect to improve contribution margins again. So despite the challenges we see, we currently believe that we can increase or improve contribution margins again, mainly driven by size effects because there's also some fixed cost leverage in our contribution margin, as you know. And the second -- the other 2 effects are basically or the other big effect is that we see scale effects again on our SG&A and marketing costs. So by that, we should significantly reduce the G&A ratio as well as the marketing ratio compared to Q3, and these effects together should lead us to the targeted profitability range that you set.On Q4 GMV, yes, as you said, I think Q3 GMV growth was 5%. We're roughly seeing that. But again, there's kind of no guarantee that this will continue as the biggest and most important weeks are going to come. So I would not like to comment further on that at this point, so...

[Operator]

The next question is from [indiscernible], Alster Research.

[Unknown Analyst]

Yes. Most of them have been answered, but I have a follow-up on the sea freight. Question is, what is actually your visibility into the sea freight and container costs going forward? So have you anything locked in for the remainder of the year? Do you have visibility into the next year? Or is it only spot business?

[Sebastian Säuberlich, CFO & Member of Management Board]

Yes. Thank you for that question. Historically for us, container freight rates were like a sea product, so to say, right? They were not like very volatile, and they were not making a large share of our cost base. So historically, we kind of rather bought it as spot or like at short-term contracts for the next quarter or something. That is currently, I think, a learning we had from the situation that we are running into, that we have to change this, at least partially, and we are now also working with a bit longer-term perspective here. So we locked in some of our volumes already now.And I think we have also locked in the majority of Q4, Q1. But again, that's kind of a -- it's a moving piece in our strategy to kind of review that on an ongoing basis and kind of start something like, probably like a rolling buying of those capacities to make sure that we are like we are in line with market rates, and we don't have these negative surprises of such cost peaks. But also then, we will not benefit if kind of prices fall dramatically, but I think that's a good thing then going forward.

[Unknown Analyst]

So just to be clear on that, the 2 percentage points out of the gross margin, we can then also expect for the fourth quarter and the first quarter next year because you're probably locking at as roughly the same prices now than for the last quarter?

[Sebastian Säuberlich, CFO & Member of Management Board]

Yes. [ I think it's okay. ]

[Operator]

So far, we have no further questions. [Operator Instructions] And there are no -- okay, now we have receiving a new question. It is from Catharina Claes, Berenberg.

[Catharina Claes, Analyst]

Just one last question for me on your warehouse situation. Can you maybe remind us what the -- yes, how the process or progress is for the new warehouse? And how we can think about, as we've mentioned earlier, the inventory levels and external warehouses that you had to rent on now in terms of the time line going forward?

[Sebastian Säuberlich, CFO & Member of Management Board]

Yes, absolutely. Thank you for the question. Yes, as we have announced I think in the last quarterly earnings call and also on our Capital Markets Day, we are planning to open a new warehouse in the first half of 2022 in Poznan, Poland that will enable us to ship kind of large and bulky furniture items from there. The progress is going as planned. So we still plan to open the warehouse in H2. And that would kind of lead to a significant reduction of complexity as we're currently working with 2 external buffer warehouses that we can then consolidate into this new warehouse.And as I said, I think progress as well. We still -- we plan to open it in H1 next year. And from then on, we'll have more capacity. But also, as I said, we have to make sure we manage our working capital well going forward. So that means we are also working towards lower inventory levels than over the next year.

[Operator]

We have no further questions on the line, so I hand back to Mr. Sauberlich for some closing remarks.

[Sebastian Säuberlich, CFO & Member of Management Board]

Okay. As we have no further questions, let me thank you all for participating today. And yes, have a good remainder of the day. Talk to you soon. And thank you very much, and goodbye.

[Operator]

Ladies and gentlemen, thank you for your attendance. This conference has been concluded. You may disconnect.