Temple & Webster shares collapse as shoppers hunt for value

The boss of online furniture retailer Temple & Webster says the company’s core Millennial customer base is still keen to buy homewares, but rising interest rates and cost pressures mean they’re hunting fiercely for the best deals.

Mark Coulter said when revealing a 46.7 per cent drop in the company’s first-half net profits on Tuesday that the business was working to import more “entry level” furniture basics to ensure it can offer products at a range of prices for customers as cost of living pressures bite.

Mark Coulter said the company was still on track to hit earnings growth of between 3 per cent and 5 per cent. Credit: Oscar Coleman

“We don’t think there is going to be a mass migration to entry-level products... but definitely we are looking to import and promote products which customers can afford,” Coulter told this masthead.

Temple & Webster shares plunged by more than 26 per cent during Tuesday’s session after the company revealed its profit had dropped to $3.8 million for the half and the group had started off January with a drop in overall sales.

Shares were trading at $3.65 in the early afternoon - a decline of 73 per cent on the group’s closing high of $13.86 during the COVID sales rush in November 2021.

Coulter said the group was focused on offering better value than bricks-and-mortar furniture competitors as shoppers worked to make their money go further in the face of rising interest rates and inflation.

“Obviously the rate rises are not great for the consumer; however, furniture is less discretionary,” he said.

He remained optimistic about the long-term growth opportunities for the business despite the current challenging economic conditions.

“We feel pretty good in our position because we have those tailwinds behind us that should allow us to get back to a growth path even in the face of macroeconomic headwinds.”

But investors appeared spooked by a 7 per cent slowdown in sales in the first five weeks of the calendar year and embarked on a sell-off from the moment the market opened.

RBC Capital Markets analyst Wei-Weng Cheng said the numbers showed cost pressures were moderating, but that the group’s numbers contained other details about customer numbers that could worry more pessimistic market watchers.

“For the bears, active customers fell for the first time... Active customers fell 11 per cent from 940,000 to 840,000 over the past half,” Cheng said.

Analysts had been predicting Temple & Webster was in a vulnerable position in the lead-up to February earnings, given the anticipated slowdown in home goods retail and the vulnerability of pure-play online retailers.

“We expect financial year 2023 [particularly the first half] to be a tough period for Temple & Webster given the strong prior period,” Macquarie’s team said last week.

Demand for ‘cafe-quality coffee at home’ gave Breville a boost.Credit: Louie Douvis

Another home goods retailer, appliances maker Breville, also fell by more than five per cent during Tuesday’s session even though it had rosier numbers to share.

The coffee machine producer cited an “air fryer tailwind” which helped propel its half-year profits up 1.3 per cent to $78.7 million for the half, as cooking appliances became the company’s fastest growing category.

Revenue from Breville’s Europe, Middle East and Africa markets declined by more than 20 per cent for the half, but boss Jim Clayton said the company’s geographic diversification meant that stronger markets offset weaker ones, while also offering products that consumers were looking for.

“We aligned our supply chain and go-to-market to take advantage of the trending tailwinds of ‘air frying’ and ‘cafe-quality coffee at home’.”

Breville shares were down 6 per cent to $20.39 just after 2pm.

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