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On Track for Profitability: The Fall & Rise of Temple & Webster

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By Published On: February 20, 20180 Comments

While its vision and strategy hasn’t changed since day one, there’s an exciting global expansion on the cards for Temple & Webster with adjacent growth to come.

Temple & Webster Group Ltd CEO Mark Coulter and CFO Mark Tayler today announced the half year results for the year ending December 2017. Most notable, was an 84 percent improvement in net losses. The Group reported a loss (after tax and EBITDA) of $890,000 compared to $5,383,000 for the same period last year. This bottom line improvement has been driven by margin growth and cost base initiatives. “The comforting fact of our turnaround journey is that our vision and strategy has not changed since day one,” says Coulter. “Our vision is still to make the world more beautiful, one room at a time.”

While the Group reported a revenue growth from $34 million in first half of FY17 to just $34.4 million in FY18, this was masked by the Milan Direct consolidation in December 2016. The first like-for-like comparative period was 1 January to 15 February 2018, where an impressive 21 percent revenue growth was reported. This validates the growth rate estimate provided in October 2017 which normalised for the Milan Direct consolidation. The Group is on track to reach profitability in the 2018 calendar year with the 2019 financial year being the Group’s first full year of profit.

Highlights

  • The Group significantly reduced its operating costs from $19.2 million in first half of FY17 to $16 million in the first half of FY18. This marks a 17 percent reduction in costs year on year.
  • Temple & Webster reported that it is still the online market leader, with over 1.1 million website users per month and 175,000 active customers.
  • First half FY18 was cash flow positive, with closing cash of $8.8 million

Temple & Webster profitability FY18 2018 Mark Coulter

Phase One Complete

“Phase one of the turnaround is now complete, and the hard work that has been done during this phase has set the business up well for growth. We have now entered phase two of the journey, and while we are still focused on reaching profitability with an existing cash reserve, our focus is increasingly turning to growth,” Coulter says.

What this actually means is that cash flow is stabilised, margins and cost base are improved, the go-to-market strategy has been simplified and a platform for growth has been established. Phase two which is now in place, focuses on reaching profitability within existing cash reserves, the growth of the core business and testing future growth plays such as show rooms, commercial trade and click-and-collect. With this is mind, Temple & Webster announced it is on track for 2019 to be a full year of profitability.

2018 was about innovating and streamlining for the Group. Web and mobile checkout was redesigned, navigation structure was simplified, the private label range was expanded, proprietary lifestyle images for key products were added, the Temple & Webster showroom was launched, on-site search was improved, afterpay and zipPay were added to payment options, ‘save to favourites’ functionality was relaunched, delivery times were reduced nationwide, and click-and-collect was launched for Melbourne customers.

Increases in gross margins have been driven predominantly by the private label product range which continues to track at -20 percent of sales with margins significantly higher year on year. This is related to better terms with suppliers and better buying decisions, resulting in less clearance activity. Another large factor in improved results are that wages are 17 percent lower for the half year on year as a result of the benefits of offshore operations and Milan Direct integration. Increased efficiency from the single brand strategy also means that marketing costs are down by 13 percent and distribution costs are 15 percent lower due to reduced warehousing storage costs.

Millennial Mileage

Temple & Webster now has a renewed focus on Millennials who have grown up buying fashion and media online, and who are more than comfortable purchasing in the online space. As a generation, they are now (hypothetically) reaching the homewares and furniture buying cycle of their lives, meaning that this demographic will drive strong market growth for years to come.

Future Growth

Temple & Webster’s plan to grow its market leaderships is to expand its private label offering, leverage scale, increase brand awareness through digital and non-digital channels, innovate through apps, image search and personalisation, expand click-and-collect and introduce its own van trials to solve the bulky delivery pain points for customers. There will also be a focus on free design help for all customers including chat, in-store and augmented reality.

The plan is also to maintain and grow its market leadership, accelerate investment into the trade and commercial division, continue to investigate offline opportunities, add further adjacent categories and test new business lines (expanding on the current Pets and DIY offering) and trial the New Zealand market which will represent the first step towards global expansion.

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