Temple & Webster (ASX:TPW) share price sinks 8% despite 550% profit increase

The Temple & Webster Group Ltd (ASX: TPW) share price is sinking today despite massive earnings growth in the latest half-year results.

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Temple & Webster Group Ltd (ASX: TPW) shares are plunging this morning, despite the company reporting massive growth in its FY21 first-half results. At the time of writing, the Temple & Webster share price is sinking 8.07% to $9.45.

Let’s take a look at what the online furniture and homewares retailer reported.

Temple & Webster share price fails to respond

The Temple & Webster share price is languishing today despite the company delivering huge growth across key metrics. Judging by the online retailer’s results, it seems many people were busy upgrading their home furnishings during the pandemic. With more people working from home, many were keen to refresh the environment in which they were spending most of their time.

Add to this the increasing shift away from bricks and mortar retailers to online shopping, and Temple & Webster has had all the ingredients for a booming half. The company’s results reflect just that, with top-line revenue growth of 118% to $161.6 million. All categories, geographies, channels, and demographics experienced strong growth during the period.

Hold onto your seats for this one. Earnings before interest, tax, depreciation, and amortisation (EBITDA) grew an astounding 556% to $14.8 million. Consequently, the additional cash generation has flowed into the company piggy bank, with cash increasing from $38.1 million at the end of June, to $85.7 million by the end of December.

If you’ve seen a Temple & Webster ad on TV recently, that was all part of a $20.7 million effort to increase brand awareness. With a 102% increase in active customers year over year to 678,000, it appears to have paid off.

The company’s efforts were rewarded on the bottom line as well. Net profit after tax increased from $2.9 million to $12.2 million, giving the business a 7.5% profit margin.

What’s next?

According to Temple & Webster, its future looks bright. The company noted that millennials are beginning to enter its core demographic age range. Additionally, many shoppers have formed new online habits as a result of lockdowns.

Temple & Webster highlighted the second half is off to a great start. Revenue growth was reported to be 118% year over year to 23 February.

Impressively, the Temple & Webster share price has returned more than 170% to shareholders over the last 12 months. 

Based on the current Temple & Webster share price, the company has a market capitalisation of around $1.24 billion.

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Mitchell Lawler 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. 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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