Temple & Webster share price: Key lessons from the H1

Temple & Webster (TPW) saw its share price bid lower after releasing its first-half (H1) results to the market on Tuesday, 2 February 2021.

The response

The TPW share price opened at $11.32 before hitting a low of $9.97 within the first hour of trade on Tuesday. By 11:30 the stock had rebounded somewhat, trading up to $10.52 per share.

Expectations were indeed high running into the H1 and remain high even when factoring in the morning’s sell-down, with TPW continuing to trade at a significant premium to the market, at 89x earnings.

The question remains though: Is that multiple justified?

Temple & Webster describes itself as 'Australia's leading online retailer of furniture and homewares' and boasts a product line-up of more than 200,000 products.

To be sure, the e-commerce focused company has experienced explosive operational growth over the last year as more and more people turn to e-commerce to meet their shopping needs.

The results

That shift in consumer behaviour is well reflected in the company’s first-half top-line results and its latest set of active customer figures. Here TPW revealed that first-half revenues more than doubled, coming in at $161.6 million, representing an impressive year-over-year increase of 118%. Active customers also doubled, rising 102% to hit 687 thousand for the period ending 31 December.

This translated into solid bottom-line growth, with TPW recording earnings (EBITDA) of $14.8 million, significantly up on the $2.3 million in EBITDA recorded in the prior corresponding period. The company also noted that it was cash flow positive for the half ending 31 December 2020, ending the period with a strong cash balance of $85.7 million.

Represented as a percentage of sales, TPW also saw its fixed costs decrease as a result of robust operating leverage, with fixed costs as a percentage of sales falling to 7.5% from 11.6%.

Commenting on these results, Temple & Webster's CEO, Mark Coulter said:

'I am pleased to present a great set of results of the first half of FY21. While 2020 remained a challenge for the country, we are proud that many Australians continued to turn to Temple & Webster for their furniture and homewares needs.’

'It is great to see our revenue growth translating into operating leverage and significant profit growth,’ Mr Coulter added.

The outlook

Looking ahead, the company said that the second half of FY21 had 'started strongly, with January's revenue growth tracking in excess of 100%.'

Management noted two key tailwinds that may continue to benefit the company, including: Promising online shopping adoption trends as a result of COVID-19, coupled with increased discretionary income levels for Australian consumers.

At the time of publishing TPW traded at $10.82 per share.