Investors Markdown Temple & Webster Despite Sales Boom




Another solid update from online furniture and homewares retailer Temple & Webster yesterday didn’t help the share price of the boom group - they fell more than 17% because silly investors wanted more than was announced.

The fall happened after shareholders told yesterday that the company continues to benefit from the COVID-19 driven buying boom.

In fact, so strong has been the boom that earnings before interest, tax, depreciation and amortisation (EBITDA) for the first 16 weeks of the 2021 financial year totalled $8.6 million, which is more than the $8.5 million the company made in all of 2019-20.

That was off the back of a 138% surge in revenue for the period compared to the same quarter in 2019-20 And revenue growth so far in October is up over 100% year on year.

A key driver of this strong earnings growth was Temple & Webster’s contribution margin. This is its margin after all variable costs including advertising and customer service costs. Management advised that its contribution margins continue to run ahead of its 15% target.

No guidance has been given for the remainder of the half or full year.

Perhaps it was that lack of guidance (why is hard to see because so many other companies are not issuing guidance) that saw the shares slide so steeply and end at $11.62, down 17.2%.

Management has reiterated that Temple & Webster is committed to a high growth strategy to take advantage of the structural shift towards online and capitalise on both organic and inorganic opportunities.

CEO, Mark Coulter, commented: “Lock-downs and forced offline retail closures have no doubt accelerated the adoption of online shopping in our category, however, we believe these trends were already at play as the oldest millennials enter their prime furniture buying years (35-65 years).

“This generation of shoppers has already adopted online shopping to a high degree in other categories such as fashion and appliances, and we believe the furniture and homewares category is next,” he said.