Temple & Webster shares have rocketed 26pc earnings beat

The group is gaining traction as the ‘go to’ online store for furniture, furnishings and homewares to see it rake in the cash and end the year with no debt and $116m in cash reserves.

Temple & Webster CEO Mark Coulter.

Temple & Webster boss Mark Coulter believes the furniture and homewares categories are growing again despite economic headwinds, and should help the online retailer hit its $1bn annual sales target within the next few years.

While shoppers continue to look for bargains and shop on promotion, they are increasingly beating a path to Temple & Webster’s door or online sales, which has helped it gain market share and left it with no debt and cash reserves of $116m at the end of fiscal 2024.

But at this stage Temple & Webster is squarely focused on revenue growth and market penetration, opting to continue not paying a dividend and explaining to investors that as it pursues this growth strategy bottom line net profit will remain slim.

Temple & Webster’s better than expected full-year results and profit margins saw shares rally 23.3 per cent to close at $11.71.

“Recently the sector has returned to growth, which has been down for quite a long time, so that’s good news,” Mr Coulter told The Australian.

“Obviously things are more expensive, there is still a rental crisis, interest rates haven’t come down, so it’s still tough.

“(Customer purchases are) less discretionary. Categories such as furniture … and sofas are doing very well.”

Temple & Webster posted record revenue of $498m for fiscal 2024, up 26 per cent, but its profits sank by nearly 79 per cent to $1.8m as it invested in growth opportunities. The bottom line was also hit by a $4.7m writedown in its investment in an Israeli AI company, with Temple & Webster building its own in-house AI and tech team.

The group reported an underlying earnings margin of 2.6 per cent, excluding one-off costs, which was within its target range of 1 to 3 per cent.

Temple & Webster, which has also recently pushed into hardware and home improvement, said it was on track for more than $1bn in mid-term annual sales.

“Despite significant cost-of-living pressures, Temple & Webster has once again bucked the trend with another great set of results for fiscal 2024,” said Mr Coulter.

“Revenue was up 26 per cent year-on-year in a market that was down around 4 per cent, which shows the strength in our product offering and the value we offer.”

Home improvement achieved $29m in revenue at a 26 per cent growth rate.

In a trading update the company said fiscal 2025 had started strongly with revenue from July 1 to August 11 up 26 per cent.

Shoppers are still spending on home furniture despite cost of living pressures, according to Temple & Webster.

Mr Coulter said “value” price points were proving popular among shoppers and that even if the online retailer offered promotions, much of that came from suppliers.

“The good thing about us are a lot of those promotions are funded by suppliers, and so actually our gross margin is holding very well and above our target range.”

Barrenjoey analyst Aryan Norozi said revenue was in line with consensus forecasts, but earnings beat market expectations by about 23 per cent.

“The first-half trading update was better than feared, with July/August 2024 sales up 26 per cent year-on-year, which was in line with Barrenjoey estimates but slightly better than consensus forecasts of 24 per cent growth,” he said.

“Cashflow also strong. Given market concerns around weaker website visitation, we expect the stock to perform well today.”

RBC Capital Markets analyst Wei-Weng Chen said the online retailer delivered a resounding earnings beat for 2024 with margins at the top end of guidance after some concerns about margins at a recent update, and looks to have started fiscal 2025 well.

“… The company has delivered a resounding EBITDA beat with margins at the top end of guidance. EBITDA margins of 2.6 per cent were 30 per cent above the midpoint of Temple & Webster’s guidance of 1-3 per cent.

“The company is generating significant excess cash and is well capitalised, and appears to be staffing up to execute on growth opportunities to take advantage of what Temple & Webster refer to as a “once in a generation” structural change.”

Citi analyst James Wang said the strong trading update came as the business cycled increasingly tougher comparative sales going into the first half of 2025.

“Customer metrics look positive, with growth skewed towards repeat customers, highlighting excellent customer retention and growing app usage.”

Temple & Webster also announced the appointment of Cameron Barnsley as chief financial officer. He joins from Morgan Stanley where he spent the last 16 years, most recently as executive director and head of technology in its investment banking ­division.