After revenue went backwards in FY23 with the silver lining of a return to growth in the June quarter, online furniture retailer Temple & Webster (ASX: TPW) has found its groove with 23 per cent sales growth since July and even greater upticks more recently.
In a trading update today, CEO Mark Coulter highlighted an acceleration of growth in the current quarter with revenue up 42 per cent year-on-year, which has been partly supported by the launch of an above-the-line brand campaign in Sydney, Melbourne and Brisbane since 22 October.
"The Black Friday-Cyber Monday trading period continues to grow in importance as customers bring their Christmas shopping forward. This year the four-day period delivered $17.4 million in sales, up 101 per cent on last year, and included multiple record days," Coulter says.
"We continue to grow our market share at a time when the overall furniture and homewares market is down, reflecting the resilience of our business model and flexibility of our merchandising strategy.
"Growing our market share is a key strategic focus, which supports our goal of becoming Australia’s largest retailer of furniture and homewares."
Coulter says the current environment gives Temple & Webster the opportunity to gain market share more efficiently and faster 'as less well-capitalised peers struggle with market conditions'.
This has been made possible by the demographic shift from offline to online, which led Temple & Webster to grow 'well and truly above trend' over the pandemic years of 2020 and 2021, but in the year that followed and especially going into FY23 'there was a bit of a reset'.
"People did go back to offline. They maybe had brought some of their spending on their home forwards, and that did take a little while to wash out," Coulter says.
Since the fourth quarter of FY23 Temple & Webster has seen a return to more normal penetration curve rates, according to the executive.
"You're starting to see what a more normalised long-term growth rate would have looked like if we hadn’t had the pandemic," he says.
Coulter also points to several demographic factors that have worked in the online retailer's favour, citing immigration as 'definitely a tailwind' as new Australians arrive, while younger people dealing with cost-of-living constraints are more likely to be drawn to Temple & Webster's offering.
"If you're you’re younger and you’re renting, your rents have gone up significantly. If you’re a Millennial, you may have bought your house in the last three to five years and hence you're sitting on a big mortgage and your mortgage is going up significantly," he says.
"Yes, there is a part of the country that may own their own home outright and may be sitting on cash and may be doing better, however, there’s a whole swathe of the community that is not feeling that and is feeling the pain.
"I think in these environments, if you can pay less money for a similar quality item, why wouldn’t you? I think that's really where we're stepping up and saying 'every Australian deserves to live more beautifully and we can help them live more beautifully within their budgets'," he says.
Coulter also points to recent company research that has found people are spending more time in the home than they were pre-pandemic.
"If you are cutting back your discretionary spend like eating out or travel, actually you’re doing more entertaining at home and you're spending more time at home," he says.
The CEO explains the company's sights are set on exceeding $1 billion in annual revenue over the next three to five years - compared to $396 million in FY23 - with growth to come from both the core business and new growth horizons in business-to-business (B2B) and home improvement segments.
"We believe at this scale we will firmly entrench our competitive moats around range, brand, data, AI and technology," he says.
"To do this, we will be focusing on five key strategic priorities. Firstly, becoming the top-of-mind brand in furniture and homewares. Temple & Webster currently ranks seventh in unprompted awareness for furniture and homewares among Australian shoppers and only 22 per cent of Australian furniture and homewares shoppers have visited our site.
"Research shows customers switch brands to a greater extent when times are tougher as they seek more value. Advertising becomes more efficient due to macroeconomic conditions."
Coulter says the plan is to have the majority of sales coming from exclusive lines, which accounted for 40 per cent of sales in FY23, but he hopes this will reach 70 per cent over the next three to five years.
Additionally, the company's growing internal artificial intelligence (AI) team of 10 is looking at how to implement AI technology across all customer interactions and internal processes. The company also has an investment in AI company Renovai, which has a team of 25.
"Early initiatives include using generative AI to power all pre-sale product inquiry live chats," Coulter says.
"We've also used AI to enhance product descriptions across more than 200,000 products. This has led to an increase in conversion, products added to cart and revenue per visit.
"In FY24, we're targeting the use of AI for all first-time care interactions, logistics routing and exceptions handling, pricing, promotions and recommendations."
Despite recent growth, Coulter does clarify that as we head into December this is traditionally a quieter period for the company.
"December is always one of our quietest months. That is an online truism – really as we get closer to Christmas, online slows as people get worried about delivery times.
"November being the new December in retail only helps us."
At the time of publication at 11.19am AEDT, TPW shares are up 14.63 per cent at $7.405 after hitting a 12-month high of $7.59. However, this is still far below heights that were close to the $14 mark in August 2021.
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