Temple & Webster Group Ltd (ASX: TPW) may not be a household name for many investors, but it should be.
Over the last five years, the online furniture retailer's share price has quietly increased by 400%, making it one of the most successful compounders on the ASX. That's not a typo. In a sector often written off as boring or cyclical, Temple & Webster has delivered tech-like returns by doing one thing very well: reinventing furniture retailing for the digital age.
Same product, new business model
Let's start with the obvious: Temple & Webster isn't just a furniture seller. It's an e-commerce platform with a scalable, asset-light model. Unlike traditional furniture retailers that have to lug around heavy furniture in their warehouses, around 80% of Temple & Webster products are sold via a third-party drop-shipping network, allowing Temple & Webster to keep inventory low and operate with high capital efficiency.
It's also expanded steadily from furniture and homewares into DIY and home improvement as well as B2B (selling to other businesses).
The business still has a relatively low market share of Australia's furniture market, but it is growing and doesn't need to capture it all to succeed.
The trend is your friend
What's remarkable about Temple & Webster's performance is how non-linear its share price returns have been. Just two years ago, the company's share price was down almost 80% from its all-time high, and for long stretches, it felt stuck.
There were questions about profitability, competition, and whether Australians really wanted to buy sofas online.
But long-term investors who stuck with the company through the dips have been rewarded handsomely. The lesson? When you bet on a category leader riding a structural trend, patience often pays off.
It doesn't mean investors should stick to companies that aren't executing well, but business has its ups and downs. The rise of e-commerce in bulky goods like furniture was (and still is) a viable trend to invest in. Temple & Webster just stayed the course, reinvested in its platform, and waited for the market to catch up.
Recent results show the story is still playing out. In the second half of FY25 to date, sales have accelerated to +23% year-on-year, with strong growth in the DIY/home improvement category. EBITDA margins are tracking to the top end of guidance, and analysts see potential for margin expansion in FY26 and beyond.
A word of caution
The long-term picture is impressive, but that doesn't mean it's risk-free.
Valuation is rich with the company trading on elevated EV/gross profit multiples, and execution will matter a lot from here. If the company fails to hit its 20–36% revenue growth guidance or can't expand margins meaningfully, the market may punish it.
Even bullish brokers like Canaccord note that at current prices, any deviation from guidance could trigger a de-rating.
Foolish bottom line
Temple & Webster's 400% rise over five years didn't come from luck. It came from riding a powerful structural trend, executing well, and reinventing an "old" sector with a better model.
The path wasn't smooth, and won't be in the future either. But that's long-term investing. If Temple & Webster continues to grow, scale, and deliver, the next five years could be just as rewarding as the last.
Just don't expect returns to be linear.
