Temple & Webster’s share price soars following half-year results
Temple & Webster (ASX:TPW) have already added to the positive retail momentum by Nick Scali (ASX:NCK), JB Hi-Fi (ASX:JBH), and Cettire (ASX:CTT).
Further helping analysts shrug off their bearish dispositions, Temple & Webster produced a solid result for 1H24. Revenue of $254 million was up 23 per cent versus the first half of FY23 and came in one per cent ahead of consensus. Cash flow was strong, and earnings before interest, taxes, depreciation, and amortization (EBITDA) of $7.5 million was about 23 per cent ahead of consensus. Admittedly, the EBITDA is off a small base, and the full-year result is currently expected to be impacted adversely by spending on brand building.
The company’s trading update for the early part of the second half revealed sales are up 35 per cent, which is 10 per cent ahead of consensus. In other news, the CFO has pulled the pin after eight years and is departing the company. Usually, this is not a good sign.
Breaking down the sales data revealed that the Black Friday and Cyber Monday promotions did pulled demand forward. The implied sales growth for the month of December is up about 20 per cent year-on-year, implying a slowdown from the roughly 42 per cent year-on-year growth recorded in October/November.
The company’s ‘delivered margin’ for the first half was 32 per cent, well ahead of many analysts’ expectations, thanks to the product mix and improved recovery of shipping costs through charging the customer.
Temple & Webster also observed they have reached the milestone of a million active customers, up 16 per cent year-on-year. They also highlighted they are taking share, with their market said to be going backwards by about six per cent so far this half.
In addition to a strong balance sheet with $114 million in cash (up from $105 million on June 30 last year) and no debt, Temple & Webster also reiterated a strong outlook, saying they were “on track to reach more than a billion in annual sales” in 2027, 2028 or 2029. That’s an ambitious doubling of sales from today’s annualised level.
For the rest of the financial year, the company said it would focus on growth, continue taking advantage of the more value-conscious consumer backdrop, gain market share, invest up to three per cent of revenue on marketing and brand awareness, and work towards a long-term EBITDA margin of 15 per cent (currently 2.9 per cent after the additional marketing spend).
Temple & Webster’s market cap was $1.23 billion before this result.
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.
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