Temple & Webster Group Limited (Temple & Webster, ASX Code: TPW or the Group) is Australia’s largest pure play online retailer of furniture, homewares and home improvement products, with 200,000 products available for sale from hundreds of suppliers.

S1 billion mid-term revenue target

Temple & Webster have reiterated their mid-term goal (implying 3 to 5 years) announced following release of the FY23 results of achieving $1 billion in annual sales. Sales for the half-year to 31 December 2024 were $314 million, a 24 percent increase on the previous corresponding period. Since the first half of FY2017, Temple & Webster have recorded a compound annual revenue growth rate of 30 percent.

The Group’s balance sheet appears capable of comfortably financing this ambitious target given the December 31 closing cash balance of $139 million and the Group’s capital-light, Drop-Ship model where customers receive products shipped directly by suppliers. This model eliminates the need to hold inventory and slashes customer delivery times and significantly reduces the Group’s working capital requirements.

Forty-five percent of total revenue from exclusive products

Revenue from exclusive products accounted for 45 percent of revenue during the December half-year, up from 37 percent for the first half of the previous financial year. Of the Group’s top 500 selling products, 78 percent are exclusive to Temple & Webster.

The provision of exclusive and private label products is a key point of differentiation in the Group’s customer proposition and increases the defensibility of Temple & Webster’s model over time.

Home improvement growing strongly

In a recent move to diversify the Group’s revenue mix, Temple & Webster recently expanded its product offering to include Home Improvement and Trade & Commercial products.

Home Improvement sales were $20 million while Trade & Commerce sales revenue was $24 million in the December half-year. Trade & Commerce sales were up 10 percent, although this is considered a respectable outcome given observed macro headwinds with business customers.

Home Improvement sales are set to grow strongly over the medium term, and were up 41 percent on the previous corresponding period. On these numbers, Home Improvement is the fastest growing category of Temple & Webster. This is a $17 billion market size with no online-only dominant market participant and low penetration. Private label penetration of home improvement products is gathering momentum, with success driven by Temple & Webster’s own collection of bathroom and HVAC products (vanities, tapware, basins, toilets, and ceiling fans), with more products under development.

Favourable medium-term outlook

Growth in online retailing is a significant strategic growth opportunity for Temple & Webster and this ‘once in a generation’ structural change enables Temple & Webster to build a platform for sustained long-term earnings growth. Importantly, this shift is being driven by demographics and technology, both of which are independent of macroeconomic factors.

Although less significant, today’s 25 basis points reduction in the cash rate target to 4.1 percent should assist furniture and homewares sales and Home Improvement activity in the months ahead. Temple & Webster have already noted that revenue from 1 January to 10 February 2025 is 16 percent higher year-on-year and with the RBA signalling that interest rates have peaked, this strongly positive sales trend is likely to be sustained.