Market Taken In by Temple & Webster Turnaround

Investors surprised yesterday by lapping up what was a mixed trading update from online furniture and lifestyle retailer Temple & Webster (TPW), sending the shares more than 18% higher at one stage.

The company’s annual meeting heard from CEO Mark Counter that it has started to see an upturn after a weak first quarter and part of the current second quarter of the company’s 2022-23 financial year.

“As previously flagged, H1 was going to be the toughest period for year-on-year comparisons due to the timing of lockdowns during FY22. This resulted in an overall decline in revenue of 14% for the period 1 July to the November 27 2022.

“The pleasing news is that we have now begun the trajectory back to growth, and Q2 so far (Oct 1 to the Nov 27) is only down 3% vs the same period last year and the month of November (Nov 1 to the Nov 27) is running slightly ahead of November last year,” Coulter told shareholders.

“This is a good sign as this month is usually our busiest sales period due to Black Friday, suggesting a return to double-digit growth during the financial year,” the meeting was told.

That was obviously the news the market focused on and the shares closed up 14% at $5.27, after earlier touching $5.49 – the highest level since November 7.

“Inventory levels remain strong across both our drop-ship network and our own private label range, and deflationary signs are appearing on both factory and container costs.

“While a return to year-on-year growth is important, equally important in this environment is a focus on unit economics and bottom-line profitability.” The Group reiterated its stated 3–5% EBITDA range for the full FY23.

The CEO said the company had cash in excess of $100 million, which will provide the Group with the ability to accelerate organic and/or inorganic initiatives to drive both revenue growth and accretion in earnings per share.

Mr Coulter admitted that the outlook wasn’t all that rosy, telling the meeting.

“As we head towards the second half of FY23, we understand that there could be turbulent times ahead for Australia, due to prevailing economic conditions.

“Fortunately, we have several factors on our side to help combat potential volatility.

“The most important of these is the financial strength of our business. We have a strong balance sheet and we are profitable, which will safeguard against any negative downturn in the macro environment.

“Furthermore, we are the market leader in a sector that we believe will grow substantially over time. About 12–15% of the furniture and homewares market in Australia is currently online, but we expect market penetration to grow to more than 50% over time, as in other retail categories. Additionally, our investments in complementary markets such as home improvement, and trade and commercial will help to diversify our revenue streams.”

Most of that seems to have been music to the ears of investors yesterday and the trading weakness was overlooked because the meeting heard that the company believed it was coming out of the downtrend.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →