Temple & Webster’s AGM and Trading Update
Temple & Webster (ASX:TPW), one of Australia’s leading online furniture and homewares retailers, held its annual general meeting (AGM) on October 24, 2024 and provided a trading update that featured robust sales growth, strategic marketing initiatives, and ambitious future targets.
For the financial year to date (FYTD) ending on October 24, 2024, Temple & Webster reported a 21 per cent increase in sales year-over-year (YoY). While this reflects a slight deceleration from the 26 per cent YoY growth reported after the first six weeks of the year, the company is still demonstrating a strong upward trajectory. The estimates imply that sales growth between weeks seven and 13 is approximately 16-17 per cent, indicating sustained consumer interest and perhaps reflecting the fact the company may be benefitting from the squeeze on consumer wallets.
It is worth noting in 2023, the company experienced a surge in sales, starting at 16 per cent YoY growth up to August, before accelerating to circa 42 per cent YoY between October 1 and November 27, 2023. With last year’s surge concentrated in November, thanks in part to promotions around Black Friday, investors may reasonably expect an improvement this year, albeit perhaps more muted thanks to the impact of sustained higher interest rates.
A key takeaway from the AGM is the return to growth in average order values. Approximately 60 per cent of orders are now from repeat customers, showcasing strong customer loyalty and satisfaction with Temple & Webster’s offerings and consumer experience.
The company announced a multi-channel brand campaign scheduled to run over November, December, and the Black Friday sales period. This is a strategic shift from previous plans, where brand investment in FY25 was expected to commence in the second half of the financial year. By front-loading marketing efforts, the company aims to capitalise on the peak holiday shopping season.
Despite an uptick in international freight rates, Temple & Webster has managed to keep margin levels within the target range. This demonstrates effective cost management and operational efficiency, ensuring profitability remains somewhat protected from at least some external cost pressures.
The company’s net cash reserves remain robust at over $100 million, compared to $116 million at the end of FY24. With a robust balance sheet and ample cash, Temple & Webster continues supporting shareholders through a $30 million on-market share buyback program.
Looking ahead, the company has reaffirmed its goal of achieving over $1 billion in sales within the next 3-5 years – specifically by FY26 to FY28. Additionally, the company maintains its forecasted FY25 EBITDA margin range of one to three per cent, even after accounting for an additional two to three per cent’ investment’ in marketing.
As an observation, analysts’ expectations remain high that Temple & Webster will meet its $1 billion sales target by FY28.
Despite the slight slowdown in sales growth rates between the trading update at the full-year results and the trading update at the AGM, analysts are optimistic about the company’s prospects, especially noting customer loyalty and the upcoming promotions and branding campaigns. This is reflected in the share price, which is down circa 13 per cent since its peak on 14 October, but 34 per cent above its July 13 low.
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.
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.
