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Temple & Webster's (ASX: TPW) position as an online-only furniture retailer has paid off in the first half, with profits up sixfold as the e-commerce boom rolls on.
The company's EBITDA grew by 556 per cent in the first half to hit $14.8 million, up from $2.3 million in the prior corresponding period.
For comparison, Temple & Webster recorded EBITDA of $8.5 million in FY20, meaning the retailer nearly doubled its profits in the first half alone.
The company's CEO Mark Coulter (pictured) says the first half results demonstrate the group's strong e-commerce fundamentals as customers change their shopping habits.
"Our strategy of being a category specialist, with a clear customer offering built around the biggest and best range of furniture and homewares in the country, combined with the most inspirational content and services and a great delivery experience, is working," says Coulter.
"The advantages of being the online market leader are apparent as we continue to grow our market share."
TPW revenue more than doubled in the first half to $161.6 million, backed by growth in sales of private label homewares and furniture.
The company also attracted an influx of new customers in the half, seeing active customer numbers double to 687,000.
Despite the strong earnings growth, shares in TPW are down more than 5 per cent this morning.
The furniture's first half online success mirrors that of other listed e-commerce players like Kogan (ASX: KGN) and MyDeal.com.au (ASX: MYD).
Kogan announced last week that it sold more than one item per second on Black Friday, contributing to EBITDA growing by more than 175 per cent.
Similarly MyDeal.com.au watched sales more than triple in the first half to $126.7 million in the December half.
Private label boom
During the half Temple & Webster's private label increased its share of total sales, demonstrating the muscle of the group's own products.
In H1 FY21, 25 per cent of TPW's total sales were private label products, up from 18 per cent at the same time last year.
To continue growing this segment Temple & Webster intends on testing machine learning forecasting software for inventory planning.
The group will also ramp up developments in product design and new materials for exclusive and "on trend" collections, as well as expanding into décor to deliver "beautiful, affordable inspiration".
Speaking to Business News Australia Coulter says the company plans to continue growing its private label offering while collaboarting with dropshippers moving forward.
"We are big proponents of a mix of dropshippers and the private label division," he says.
"Because we have this healthy ecosystem, dropshippers allow us to have a much bigger range and stock than if we were just doing private lablel.
"However the private label allows us to fill product and price gaps, there are margin level opportunites in the private label side."
Tailwinds for the second half
The acceleration of online shopping adoption trends due to structural shifts in the retail space are a boon for Temple & Webster as it moves into H2.
The company also expects an increase in discretionary income due to travel restrictions and the continued recovery of the housing market to pay off for the online shop.
Planned initiatives like an Android app and augmented reality experiments are also expected to contribute to TPW's revenue growth more than doubling in H2 FY21.
While initiatives like JobKeeper are keeping the Australian economy ticking and boosting the discretionary spend of everyday Australians the stimulus will end soon. However, Coulter says that won't have much of an impact on Temple & Webster considering its strengths in e-commerce.
"All of these macroeconomic trends are competing against the underlying trend of the shift online," he says.
Shares in TPW are down 5.34 per cent to $10.45 per share at 11.28am AEDT.
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