The Temple & Webster Group Ltd (ASX: TPW) share price is dropping lower on the day of its annual general meeting.
At the time of writing the online homewares and furniture retailer's shares are down 2.5% to $13.70.
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Why is the Temple & Webster share price dropping lower?
Investors have been selling the company's shares this morning despite its annual general meeting presentation including a trading update which reveals that its exceptionally strong growth has continued in October.
According to the release, as of 19 October 2020, financial year to date, Temple & Webster's revenue was up 138% on the prior corresponding period. Revenue growth so far in October is up over 100% year on year.
This strong top line growth led to its earnings before interest, tax, depreciation and amortisation (EBITDA) coming in at $8.6 million for the first quarter. While no figure was provided for the prior corresponding period, management notes that this is more than the entire EBITDA it generated in FY 2020.
A key driver of this strong earnings growth was Temple & Webster's contribution margin. This is its margin after all variable costs including advertising and customer service costs. Management advised that its contribution margins continue to run ahead of its 15% target.
Finally, another positive is its customer satisfaction, which remains at record levels. The release shows that its Net Promoter Score is ~70%.
What now?
No guidance has been given for the remainder of the half or full year.
Management has reiterated that Temple & Webster is committed to a high growth strategy to take advantage of the structural shift towards online and capitalise on both organic and inorganic opportunities.
It also notes that its core furniture and homewares category is a ~$15 billion market, with accelerating online adoption.
The company's CEO, Mark Coulter, commented: "Lock-downs and forced offline retail closures have no doubt accelerated the adoption of online shopping in our category, however we believe these trends were already at play as the oldest millennials enter their prime furniture buying years (35-65 years). This generation of shopper has already adopted online shopping to a high degree in other categories such as fashion and appliances, and we believe the furniture and homewares category is next."
