Temple & Webster Group Ltd (ASX: TPW) quadrupled in value during FY20 despite bushfires, pandemics and lockdowns. The share price started the financial year at $1.38 and finished at $6.31 on Tuesday, 30 June. The company ended the year on a market capitalisation of $717.7 million.
The company sells furniture and kitchenware via a drop shipping operations model. That means they ship directly from the manufacturer to the customer. In addition, Temple & Webster also has Milan Direct, its private label brand. Milan Direct is sold on the company’s marketplace platform and sold wholesale to distributors.
Like many other companies, Temple & Webster saw an increase in online sales during the lockdown. On 18 June the company announced revenue growth of 90% against the previous corresponding period (PCP). That is an outstanding level of revenue growth echoed in other companies with online sales channels.
During the lockdown, the company saw a dramatic improvement in performance. Revenue rose by 68% YTD and earnings before interest, depreciation, and amortization (EBITDA) rose by an astounding 668%. Moreover, the company’s active customers increased by 68% to 440,257. The company’s share price rose more than 8% over the 3 days after this announcement.
The unpredictable element is, what happens once the lockdown is over? Temple & Webster CEO and Co-founder, Mark Coulter, said:
“…We can already see in our numbers that many of the customers who have never shopped with us before, and may be first time online shoppers in our category, have already returned and made repeat purchases…”
This bodes well. It is also supported by Australia Post data which shows that e-commerce growth rose by 80% in the 8 weeks following the World Health Organization’s (WHO) announcement. They believe that this year online sales will reach 15% of all retail sales. That is 3–5 years ahead of previous forecasts.
Share price history
As a company Temple & Webster is still very much in the growth phase. The company has only turned a profit once in FY19 since listing in 2015. As it recorded earnings it also recorded its first return on equity (ROE) figures. This was very impressive at 24.7%. This means the company returned about a quarter of the net asset value.
The company’s share price has increased 585.87% since listing. The vast majority of this growth has been in FY20, and most of that was after the 23 March market trough.
Temple & Webster benefited greatly from the COVID-19 lockdown. Not only did they see a large percentage of new customers, but many of them were repeat users of the website. The likelihood that they will continue with high online sales after the hard lockdown is reasonably high. At the very least the company has had a chance to impress new people. Time will tell if they were successful.
Most interesting from these figures was the huge leap in EBITDA. It implies a solid cost base that is able to service sales levels far above the level of, say, Christmas of 2019 with little additional costs.
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Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia has recommended Temple & Webster Group Ltd. 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.