Temple & Webster’s first half result has surprised RBC Capital Markets, with the broker saying the result implied a strong end to the year’s trading.
The online furniture retailer reported a 50 per cent growth in revenue, well above RBC’s estimate of 41 per cent.
“Trading through to mid-October was tracking at 45 per cent on the prior corresponding period (pcp), hence the 50 per cent growth recorded in 1H20e implies an acceleration through November and December,” said RBC analyst Tim Piper.
“Given the strong share price performance recently, in our view the market was pricing in a revenue result around the ~50 per cent mark, an impressive result given the underlying category and the retail environment more broadly has been patchy.”
The broker noted impressive customer growth which was achieved with a steady cost of customer acquisition.
“Over the longer term Temple & Webster plan to leverage its greater scale, slow investment in fixed costs and focus on growing profits. This reinforces our view that over the next couple of year’s earnings growth will be modest,” said Mr Piper.
“With online penetration remaining low and some competitors under pressure, we agree that now is the time to invest in growing market share and there remains a number of untapped marketing channels that Temple & Webster can explore.”
Temple & Webster shares have soared through the morning trade, up 20.5 per cent to $3.41.