The Temple & Webster Group Ltd (ASX: TPW) share price is up 27% after announcing its AGM trading update.
Temple & Webster is an online retailer of furniture, homewares and home improvement products.
FY27 trading update
The company noted that revenue is lower so far this year because it has deliberately reduced “promotional depth” and raised prices on some ranges.
Due to that combination of factors, revenue is down but the contribution margin is growing. Since August, trading has improved.
For the period 1 July to 19 October, revenue was down 8% year on year, but contribution margin dollars were up 16%. But, between the August trading update and today, the implied revenue decline run-rate is just 4%, up from a decline of 13% in its August update.
Growth initiatives
The company noted that it expects online shopping to capture a greater share of the furniture and homewares market, which is a natural driver of the company’s own market share of Australia (which is currently below 3%).
Temple & Webster believes AI will be transformative for the retail industry as a whole. As a digitally-native business, management believe this will help the company compared to traditional retailers.
It also talked about how it’s using AI within its business to help with its supply chain, merchandising, customer care and tech teams to improve productivity. It’s also working hard to increase ‘discoverability’ with LLM AIs, which could help increase its abilities with digital advertising.
The company mentioned it’s exploring and testing larger international markets in the near-future, leveraging AI and technology for low-cost market entry.
It also said that a recent shift in its Brisbane marketing led to an 11% uplift in traffic, a 7% increase in revenue and 14% increase in share of branded Google search. It will rollout this marketing to additional markets, including Sydney and Melbourne.
The company said that it’s increasing its private label and exclusive product penetration, to differentiate its range. A recent program replaced approximately 200 entry-level manchester products with a higher-quality private label range, which delivered higher average order values, an 8% rise in revenue and fivefold increase of private label penetration and 11% higher delivered margin.
Outlook for the Temple & Webster share price
The company said that from mid-February, it will begin to cycle periods with similar promotional activity, so it expects to return to growth with its improved unit economics. It has a strategy to focus on sustainable growth for both revenue and earnings.
Temple & Webster said it remains on track for FY27 EBITDA to be in the range of $33 million to $40 million, an increase of approximately 50% to 80% for FY26. Its growth initiatives are funded within this range.
It wants to become the largest retailer in its category in Australia, which I think is a great goal as an owner of Temple & Webster shares myself. Over time, I think its market share can continue to grow, so it’s a compelling one to own.
