Temple & Webster: doubling down on growth with a clear path to $1 billion and higher margins
Temple & Webster’s (ASX:TPW) financial year 2025 (FY25) results underline a business scaling rapidly in two markets still in the early innings of digital disruption. Revenue rose 21 per cent to $601 million, capped by a 28 per cent June surge that has flowed into FY26, where year-to-date (YTD) sales (1 July–11 August) are also up 28 per cent.
With market share at just 2.7 per cent in the $19 billion Australian furniture and homewares market – and online penetration a modest 20 per cent versus 35 per cent in the U.S. and 29 per cent in the UK – the runway is long. The $18 billion home improvement segment is even more fragmented, with only 5-10 per cent of sales online and no dominant digital-first player. Here, Temple & Webster grew revenue 43 per cent to $42 million in FY25, with management convinced this category can eventually deliver higher margins than furniture.
Building an exclusive edge
A key competitive lever is exclusivity. Exclusive products – both private label and exclusive drop ship – now account for 45 per cent of revenue, with exclusive drop ship growing 60 per cent year-on-year (YoY). Management’s long-term target is 70 per cent. Exclusive drop ship in particular offers the pricing power of private label without the capital drag of holding inventory, boosting return on invested capital while deepening brand differentiation.
In home improvement, the parallels with high-margin, high-private-label incumbents like Bunnings and Reece are clear. If Temple & Webster executes, the category could become a second profit engine.
Margins: short-term discipline, long-term 15 per cent ambition
FY25 earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) was $18.8 million at a 3.1 per cent margin – towards the top of its 1-3 per cent guidance – despite elevated brand marketing investment. Delivered margin rose to 31.8 per cent, contribution margin hit $82 million, and fixed costs fell to 10.6 per cent of sales. Artificial Intelligence (AI) adoption is already improving cost efficiency, with customer service costs down 60 per cent relative to revenue in two years.
For FY26, guidance is for 3-5 per cen EBITDA margin (target midpoint: 4 per cent), with delivered margins of 30–32 per cent. Over the longer term, management is confident in achieving 15 per cent EBITDA margins – a material uplift that would meaningfully re-rate earnings power.
Balance sheet firepower and expansion moves
The company ended FY25 with $144 million in cash (up 35 per cent YoY) and strong free cash flow (+90 per cent to $38 million), which give Temple & Webster scope to invest while retaining capital discipline. A new Western Australian (WA) warehouse in FY26 should lift sales in an underpenetrated state and cut delivery times and costs. M&A remains on the radar, but management has shown restraint, preferring organic expansion unless the right asset appears.
Macro tailwinds lining up
Potential interest rate cuts and government housing initiatives could fuel category growth in FY26. Housing turnover is a major driver of furniture and homewares demand, and management is already seeing early signs of improvement.
The opportunity is clear: win share in two underpenetrated, multi-billion-dollar markets; expand exclusive product penetration to enhance margins; and scale towards $1 billion in revenue. At 15 per cent long-term EBITDA margins, the earnings profile looks materially different from today – a scenario not yet fully priced in by the market.
Valuation potential: is $1 billion revenue and 15 per cent margins, the limit?
At $1 billion in revenue and a 15 per cent EBITDA margin, Temple & Webster would generate $150 million in EBITDA. Applying a peer-consistent EV/EBITDA multiple of 12x–15x for high-growth, asset-light e-commerce retailers suggests an enterprise value range of $1.8–$2.25 billion.
With net cash on the balance sheet, this equates to a market capitalisation of roughly $1.9–$2.35 billion.
But valuing the company on near-term earnings may miss the longer-term potential. Remember, investors tend to overestimate the near term and underestimate the long term.
TPW has the potential to be a dominant name in its category, and being online, it is capital-light, which means potential for much higher market valuations.
TPW’s current market capitalisation of circa $3 billion reflects the fact that there aren’t many businesses with the ability to grow as fast and as far as TPW does. TPW also represents the online listed pure e-commerce player that has worked. Red Bubble, Kogan and Catch have not been as successful.
The company is only just beginning to build its brand. With momentum building, it commands just two per cent of the Furniture and Homewares category and virtually zero market share in the Home Improvement category. The total addressable market (TAM) of each of these categories is approximately $19 billion. And TPW is currently generating revenue of just $600 million.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
