The Temple & Webster Group Ltd (ASX: TPW) share price has plummeted 25% after reporting its FY23 half-year result.
Temple & Webster is a leading online retailer of furniture and homewares in Australia.
Temple & Webster HY23 result
Here are some of the highlights from the report:
- Revenue fell by 12% to $207.1 million
- EBITDA (EBITDA explained) dropped by 39% to $7.3 million (or, it fell 20% excluding The Build investment)
- However, FY23 second quarter EBITDA grew 13% year on year to $5.2 million
- Cash increased $1.4 million to $102.4 million
- Active customers declined to 840,000
- Revenue per active customer increased 7%, driven by both average order growth and repeat orders
- Around 57% of orders are now from repeat customers – this increases the return on marketing spending
The business said that sales to households improved over the half, while business to business trading remained “strong”. Trade and commercial revenue increased 17%, while home improvement revenue grew by 12%.
Management thought this was going to be the toughest period for year over year comparisons because of the timing of lockdowns in FY22. FY23 first quarter revenue was down 18%, while second quarter revenue was only down 6%. December 2022 revenue was up.
Temple & Webster said that its customer proposition around ‘affordable beauty’ is “well suited” to any further changes in the economy.
Outlook for the Temple & Webster share price
The company is confident about returning to double-digit revenue. That’s partly because e-commerce penetration in Australia still “significantly lags” other markets such as the US and UK.
There is an ongoing shift from offline to online, driven by demographics and technology, which are independent of general economy factors.
It’s expecting further market share gains, especially as competitors weaken.
Sales from 1 January to 5 February, being the first five weeks of the second half of FY23, were down 7%, with the prior corresponding period boosted by the Omicron outbreak.
It’s going to keep focusing on margin optimisation and cost management programs. It’s prioritising profitability over growth.
The company has over $100 million of cash to fund growth and potentially pursue acquisitions. Management believe the company has a much larger addressable market after expanding into the trade and commercial, and home improvement categories.
I think the Temple & Webster share price is a long-term buy at the current level after falling so heavily. While volatility is likely, I believe the future is very promising for this business.
