Why the Temple & Webster (ASX:TPW) share price hit new highs last year

The share price of ASX online furniture retailer Temple & Webster Group Ltd (ASX:TPW) soared last year on the back of a surge in online shopping.

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ASX online furniture retailer Temple & Webster Group Ltd (ASX: TPW) was one of the surprising success stories to emerge from 2020. Nationwide lockdowns meant people were spending more time in their homes than possibly ever before – and a lot of them decided to spruce up their furniture or set up home offices. And with most retailers forced to close their stores, the only place for people to satisfy their craving for new furniture was online.

This saw the Temple & Webster share price surge by more than 300% in 2020 and hit an all-time high of $14.05 in October last year.

What drove the Temple & Webster share price?

Temple & Webster had a breakout year in FY20. Revenues increased 74% year on year to $176.3 million, and active customers increased by 77% to almost 500,000. Net profit after tax jumped from under $4 million in FY19 to almost $14 million in FY20.

The company also has a healthy balance sheet. Temple & Webster was cash flow positive in FY20 and ended the year with a little over $38 million in cash on its balance sheet and no debt. The company has also raised an additional $40 million through an institutional placement at the beginning of FY21.

FY21 performance

As with many companies operating in the current environment, Temple & Webster seems reticent to provide specific full year earnings targets for FY21. However, it has already started the year strongly, keeping up much of the business momentum built up over the second half of FY20.

At the company's October AGM, company CEO Mark Coulter gave a trading update for the period from 1 July 2020 to 19 October 2020. Year-to-date revenue was up 138% versus the same period in FY20, and first quarter earnings before interest, tax, depreciation and amortisation (EBITDA) had come in at $8.6 million – already greater than EBITDA for all of FY20.

However, some of the wind has gone out of the Temple & Webster share price more recently. After surging off its March 2020 low of just $1.52 to its all-time high of $14.05 by late October – a scarcely believable gain of over 800% in just 7 months – Temple & Webster shares have slid back down to $11.27 as at the time of writing.

Other retailers cashing in on digital sales

The Temple & Webster share price wasn't the only ASX retail player to surge last year on the back of a spike in online shopping. Shares in Australian e-commerce company Kogan.com Ltd (ASX: KGN) soared to a new record high of $25.57 in October 2020.

Plus-size women's clothing company City Chic Collective Ltd (ASX: CCX) also set a new record high share price of $4.24 earlier this week. It also boosted its digital presence last year, and recently expanded into the United Kingdom market through acquisition of the e-commerce and wholesale assets of popular high street brand Evans.

Rhys Brock owns shares of Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia has recommended Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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