Temple & Webster sales rocket, but no dividend

Online furniture retailer Temple & Webster has decided not to pay a dividend but rather reinvest its profit in the business.

The furniture category continues to capture a strong share of household spending during the COVID-19 pandemic.

Online furniture retailer Temple & Webster has decided not to pay a dividend but rather reinvest its profit in the business.

Temple & Webster on Monday posted a 269.5 per cent rise in full-year net profit to $13.9m as its revenue surged 73.5 per cent aided by a consumer-driven online buying spree during the COVID-19 lockdown.

That momentum continued into the new financial year with Temple & Webster revealing that sales from July to late August had rocketed by 161 per cent.

The bumper performance for fiscal 2020 and the first few months of 2021 sent shares in Temple & Webster up almost 20 per cent, before closing up $1.31, or 16 per cent, at $9.69. The stock is up 265 per cent since the start of the year.

Temple & Webster’s fiscal 2020 results show full-year revenue rose 74 per cent to $176.3m, with an EBITDA of $8.5m, which is up against the $1.5m of the prior corresponding period.

The pure play online retailer said second-half revenue was up 96 per cent while fourth-quarter revenue, during the peak of the lockdowns, lifted 130 per cent.

The group ended the year cashflow positive, with no debt and $38.1m in cash, excluding the proceeds from a recent $40m capital raising. Chief executive Mark Coulter said this wasn’t the time to be returning cash to shareholders with so many growth options before the firm.

“There is no dividend this year, there is so much growth ahead of us,’’ Mr Coulter said.

This internal investment in growth included a new television advertising campaign that had delivered good results for the retailer during the year and would be repeated soon with a second TV campaign, while the company had also launched a new mobile app for shoppers.

He said the furniture category continued to capture a strong share of household spending during the COVID-19 pandemic, especially as other traditional sectors, such as travel and offshore holidays, were shut out for many consumers.

“There is the sentiment we have seen a benefit because people aren’t spending money on discretionary items like travel and restaurants. People are also spending far more time in their homes … and have more time to spend on their homes,” he said.

RBC Capital Markets analyst Tim Piper said the trading update showed around 160 per cent in monthly sales growth and a strong run-rate in monthly cash generation of around $21.4m from July to August.

“Temple & Webster has rerated materially to an expected fiscal 2021 enterprise value-to-sales multiple of 4.1 times, however, we believe this is not unreasonable compared to high-growth global e-commerce and online marketplace peers,” Mr Piper said.

“Temple & Webster has deserved a rerating on the back of consistent management execution, increasing earnings margins, high-growth rate, market-leading position and strong underlying market trends.”