Industry:Online retail,furniture sales.
Loading
Main products:Homewares,furniture and DIY project supplies.
Key figures:Chief executive Mark Coulter,chair Stephen Heath.
The bull case:Coulter had good news to share with investors about the company’s outlook at the annual general meeting last week.
It was always going to be tough to compare sales over the past few months with last year,when much of the east coast was in lockdowns.
Between July and October,revenues were down 14 per cent,Coulter said – but the month of November was slightly ahead of last year. “This is a good sign as this month is usually our busiest sales period due to Black Friday,suggesting a return to double-digit growth during the financial year.”
The company also reported that while the rest of the economy is worrying about inflation,it has actually seendeflationarysigns in factory and container costs.
Temple& Webster’s homewares are a hit among the millennial crowd.Credit:Louise Wellingtin
Goldman Sachs analysts expect the company to return to solid revenue growth again from 2024 to 2025,forecasting that while homewares sales will decline over the next couple of years,Temple&Webster can gain enough new customers to offset this.
“We believe the market is underestimating the long-term potential of this business given near-term macro headwinds across the category,” analyst Sophie Carran said last week.
“Longer term,we expect both growing online penetration and a consolidation in market share towards Temple&Webster to drive a 10-year revenue compound annual growth rate of more than 13 per cent.”
UBS analyst Tim Piper said the company remains the preferred e-commerce pick within his team’s coverage,noting that Temple&Webster has been able to hold onto more COVID-driven growth than peers like Kogan.
The balance sheet “screens as the strongest out of this peer set with net cash of over $100 million”,Piper said in a note,which could provide a buffer if trading conditions worsen.
Loading
The bear case: The slowdown in overall online retail sales is not the only business risk causing analysts to be wary.
Sales of furniture and homewares in particular are being tipped to slow from next year as interest rates continue to rise and Australian consumers feel the full impacts of inflation and increased mortgage repayments on their household budgets.
Macquarie’s retail team notes that trading has been improving in the lead-up to Christmas,but is cautious about the appetite to spend into the next year.
“We expect the macroeconomic environment to continue to be tough over the short-medium term given higher interest rates,a shift back in-store and a COVID pull-forward of demand,” its analysts said in a note to clients. The group has a target price of $4.05 on the stock,well below its $4.99 closing price last week.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.