TPW's Designs on the Future Intact Despite Headwinds




Online furniture and homewares group Temple & Webster ran into some headwinds in the year to June just as the company was expanding other parts of its business.

On top of that the management warned of more headwinds ahead when comparisons will be made to current performance in the six months to December with the same period in 2021-22 and the widespread Covid lockdowns in late 2021.

The company said that comparisons with trading at the moment with July 2021 are showing a big fall - some 21%. But that will fade as the year goes on.

“Timing of lockdowns during FY22 will make year on year growth comparisons volatile during the first half,” the company explained on Tuesday.

"This can be seen with July trading down 21% year on year, and August (to 14th) trading 17% down year on year. Importantly, this trading is ahead of our internal estimates, and month-to-month seasonality suggests a return to double digit growth during FY23 once we finish lapping COVID lockdowns from the year before,” the company said on Tuesday.

So a real view of its 2022-23 sales and earnings performance won’t be clear until well into 2023.

Heading into the current financial year, Temple and Webster will at least be taking a solid sales performance for the 2021-22 financial year, but not earnings.

While revenue rose 31% to $426.3 million in 2021-22, net profit before tax fell 31% to $13.2 million.

The company tried to deflect the weak earnings for the year to June by making comparisons on a two year basis (ie, back to 2019-20 and the first year of the pandemic).

On that basis, revenue was up 142% over the two years which the company said was a 55% two year compound average growth rate, which is nonsense for the purposes of reporting on the company’s performance in 2021-22.

Active customer numbers grew 21% to 940,000 according to the company and “revenue per active customer grew 6% for the 8th consecutive quarter of growth.”

T&W said its trade and commercial division grew 39% “despite challenging market conditions and home improvement saw a 61% growth rate “with the Build performing strongly in its first few operating months.

The company’s closing cash balance rose to $101 million with no debt.

Temple &Webster CEO Mark Coulter said in Tuesday’s statement to the ASX that “despite some significant domestic and global challenges, Temple & Webster has once again bucked the trend to deliver a great set of numbers. Revenue was 31% up on last year and 142% on a 2-year period, which equates to a 55% 2-year CAGR, EBITDA was up 38% on a similar 2-year CAGR basis.

"Due to careful margin and cost base management, we were able to drive an EBITDA margin result at the top end of our 2-4% guidance, even in these challenging retail conditions, and after our investment into The Build.”

Looking into 2023, the company has lifted its EBITDA margin:

Given FY23 cyclical headwinds, we have accelerated some of our margin optimisation and cost management programs. As such, we are upgrading our EBITDA margin % guidance for FY23 from 2-4% to a 3-5% range.

"This profitability range is after our investment into The Build, which demonstrates the increasing operating leverage of the core business.”

"We remain committed to our profitable growth strategy. We’re confident we have the people, platforms, brand and business model to achieve our goal of becoming Australia’s largest retailer of furniture and homewares,” he said.