The Temple & Webster Group Ltd (ASX: TPW) share price is in focus today after reporting a trading update showing growth.
Temple & Webster is the largest purely-online retailer of homewares and furniture in Australia.
Promising trading update
The business revealed that it has returned to year on year growth now that it has finished cycling against COVID-impacted periods. Trading for the period of 18 April to 15 May 2023 showed year on year growth of 10%.
Temple & Webster also said that trading improved over the half, with sales down 5% for 1 January to 15 May compared to the same period last year. That 5% decline was better than the 7% decline for the first five weeks of the second half of FY23.
The ASX share also said that its full year profitability margin guidance range is still 3% to 5% for EBITDA (EBITDA explained).
It also revealed that it has cash of around $100 million with no debt, meaning a significant percentage of its market capitalisation (around $460 million) is supported by the cash figure.
Management commentary
The Temple & Webster CEO Mark Coulter said:
We recognised early that in this inflationary environment, customers would be looking for choice and value and we have successfully adjusted our range, promotional activity, pricing and on-site merchandising to reflect these changing customer needs.
The Australian furniture & homewares category remains highly under-penetrated in terms of its shift to online compared to other leading markets such as the US and UK. As the pure-play online market leader, we believe this period will allow us to aggressively grow market share as we leverage our data capabilities, asset light model and strong balance sheet.
AI update
Temple & Webster also gave an update about its AI initiatives. It sees the potential for AI to drive both conversion and customer benefits, along with productivity gains to lower its overall cost of doing business (CODB).
The ASX share has recently increased its investment in Renovai, an Israeli AI business which is “digitising the interior design process”. Currently, that business “powers product recommendation mood boards on site which have shown a significant increase in conversion rate for customers who interact with this tool.”
Temple & Webster will also work with the Renovai team to enhance these AI tools and the customer shopping experience.
The ASX share has also assembled a dedicated internal team consisting of software engineers, data scientists and product managers. The scope of this team is to implement AI technology across all customer interactions and internal processes.
Temple & Webster revealed that ChatGPT now powers all pre-sale product enquiry live chats (which are 25% of all customer enquiries). This “has led to an increase in live chat customer satisfaction, an increase in customers adding products to their carts and an increase in conversion rates from this channel.” Management thinks this can drive its margins higher and let it win market share.
Thoughts on the Temple & Webster share price
I think this is a very promising update for the company. A return of revenue growth is good news for the longer-term, while the AI news is very interesting.
By 2030, I believe that Temple & Webster shares will have risen significantly, it could be one of the most promising ASX growth shares around.
