Business Model
- Drop-shipping model whereby products are sent directly to customers by suppliers
- Reduces the need to hold inventory, allowing for a larger product range
- Complemented by a private label range sourced directly by Temple & Webster from overseas suppliers
Catalysts
- Profitable in FY24
- 26% increase in revenue year-on-year (yoy) at $500m. Target of $1b+ yearly on track
- Market share is increasing (2.5% up 31% yoy)
- Profitability means cashflow generated is used to fund growth
- External economic Conditions
- Consumer confidence and disposable income levels will impact demand for discretionary items
- Rising interest rates or a slowdown in housing dampens demand. Booming property market drives sales as people invest in home improvements
- COGS, logistics and Supply chain efficiency
- Supplier costs, currency exchange rate fluctuations
- Increase profits by bulk purchasing
- Market Competition
- Other online platforms (Koala, Catch)
- And traditional retailers (IKEA, OzDesign, Freedom, Castlery)
How can TPW reach this future state?
- Millenials/Gen Z cohort are driving online channel adoption
- Once in a lifetime generational shift from offline to online
- Australian online penetration for Furniture & Homewares is 20% (Euromonitor.com Home and Garden FY23)
- Adoption is higher in US and UK (leading indicator)
- Generative AI delivering material conversion and (Cost of doing business) CODB gains
- Utilizing data analytics and AI/AR to personalize the shopping experience
- Digital marketing and content creation
- Broader breadth/depth of product offerings and private label growth (and offer product exclusives)
- Building a platform for growth
- Expansion into adjacent markets (B2B and home improvement)
- Expansion to international markets
- Asset light model and fully funded for growth
How I can Be wrong?
- Can it sustain post pandemic reset level explosive growth?
- Lose leading market share (risk of no physical store presence)
- Regulatory changes
- E.g Data privacy, non-compliance, sustainability initiatives
- Technology and Platform (investment into AI, data analytics)
- Marketing and advertising costs
- It’s crucial for driving sales
- Shift in shopping habits
- Could adoption of AI in handheld devices
- Vertical integration or acquisitions could change the operating model slightly
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Disclaimer
Meistro is an employee of Simply Wall St, but has written this narrative in their capacity as an individual investor. Meistro holds no position in ASX:TPW. Simply Wall St has no position in the company(s) mentioned. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimate's are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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