The Temple & Webster Group Ltd (ASX: TPW) share price is under the spotlight after the retailer announced significant growth in its FY25 half-year result.
Temple & Webster is an online retailer of furniture and homewares. It has a small but growing home improvement segment too.
HY25 result
The company reported its result for the six months to 31 December 2024:
- Revenue rose 23.6% to $313.7 million
- ‘Delivered’ profit up 25.7% to $101.5 million
- EBITDA jumped 76.3% to $13.2 million
- Net profit after tax (NPAT) up 117.9% to $9 million
- Free cash flow up 61.4% to $32.5 million
Highlights
The company had a strong year, with growth supported by both new and repeat customers, as well as higher average order values.
Active customers increased 22% to around 1.2 million, while revenue per active customers rose 2% to $470. Pleasingly, home improvement sales grew 41% year on year.
Impressively, exclusive products now represent around 45% of total revenue, giving the company an increasing competitive advantage against other retailers. Its market share has risen to 2.9% of the total Australian furniture and homewares market.
Technology is playing a larger role in the company’s operations. AI is now handling at least 60% of all customer before and after sales support interactions, which has resulted in a reduction of customer care costs by more than 50% since HY23.
This has helped the EBITDA margin reach 4.2% in this result, which rose from 2.9% in HY24. Fixed costs as a percentage of revenue declined to 10.5%.
The business finished December 2024 with a cash balance of $139 million, up from $107.2 million at June 2024, with no debt.
Outlook for the Temple & Webster share price
The online retailer said its market share gains and revenue growth have continued into the second half of FY25, with revenue up 16% between 1 January to 10 February 2025, despite the cost-of-living challenges.
February revenue growth was faster at 19%, year on year.
Temple & Webster expects this revenue growth trend to continue because of “easing of comparison growth rates” and the fact it can use its “margin flexibility” it has built in the first half of the financial year.
The company reiterated the EBITDA margin guidance for FY25 of between 1% to 3%, while it’s on track to reach its goal of $1 billion annual revenue in the medium-term.
It’s impressive how consistent the company is growing and how its profitability is coming through, though it has indicated it wants to keep investing for growth.
In five years, I think this could be a much bigger business, particularly if its home improvement segment keeps growing.
However, I wouldn’t choose to significantly invest right now – it has soared higher over the past two years. I’d wait until the market becomes cautious on retail spending again because of a possible recession (in the future, not right now), We saw significant share price declines in 2022 and 2023, and even in mid-2024.
I’m a happy long-term shareholder, but there are other ASX growth shares I’d focus on first.
