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Why the Temple & Webster share price is soaring today

ASX retailer Temple & Webster Group Ltd’s (ASX: TPW) share price has risen 11.17% to close at $1.14 on Wednesday following the release of its unaudited result for the half-year ended 31 December 2018 this morning.

Key highlights from this morning’s release include:

  • Revenue rose 40% year on year to $49.3 million.
  • EBITDA of $0.9 million compared to the $0.5 million loss in the prior corresponding period (pcp).
  • Active customers grew 32% year on year to 231,000.
  • Cash flow positive half of $1.6 million.
  • Cash at bank of $11.5 million and no debt
  • Contribution margin (margin after all variable costs) rose to 16.5% versus the pcp’s 16.1%.
  • The percentage of advertising to sales fell from 11.5% in the pcp to 10.9%.

This was a strong half-year result for the company in what has been a challenging operating environment for Australian retailers. Temple & Webster is Australia’s leading e-commerce company in the furniture and homewares market and it has managed to grow both its customer base and the amount of revenue per active customer amidst a downturn in Australia’s housing market.

Trading update and outlook

Temple & Webster also released a January trading update this morning that revealed it has started 2019 strongly with growth in January exceeding the December half-year period’s growth rate of 40%.

Furthermore, the company has announced it will continue to invest in future growth via a number of initiatives. These include launching a mobile app to capitalise on the growth in mobile e-commerce, international expansion in New Zealand, a move into home improvement and further investments into the company’s B2B Trade & Commercial division. Management also remains confident that the company will report its first full-year profit in FY19.

Foolish takeaway

With online sales only representing around 4% of the $13.6 billion Australian furniture and homewares market, there is ample room for a company such as Temple & Webster to increase market share. Comparable Western countries such as the United Kingdom and the United States have online sales penetration rates of around 14% in the furniture and homewares market.

The share price of Temple & Webster has now increased by 205% over the last 12 months, comfortably outperforming traditional retailers such as Harvey Norman Holdings Limited (ASX: HVN) and Myer Holdings Ltd (ASX: MYR) who have seen falls of 20% and 40% respectively.

With revenues growing at 40% and a market cap of around $130 million, Temple & Webster is definitely a stock to monitor in the small-cap space.

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Motley Fool contributor Tim Katavic has no financial interest in any company mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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