Temple & Webster expects to return to double digit growth in FY23; shares rally

What happens when a severely de-rated stock like Temple & Webster (ASX: TPW), down -70% from all-time highs delivers mediocre results and begins taking strides towards profitability?

Apparently it rallies 25%.

Results at a glance:

Source: Temple & Webster | Table: Market Index

Growth slows but in-line with expectations

"Despite some significant domestic and global challenges, Temple & Webster has once again bucked the trend to deliver a great set of numbers," said CEO Mark Coulter.

"Due to careful margin and cost base management, we were able to drive an EBITDA margin result at the top end of our 2-4% guidance, even in these challenging retail conditions," he added.

Active customer growth slowed to 21% in FY22 compared to 62% growth in FY21 - signalling that the landgrab and parabolic growth period has somewhat come to an end.

Now time to become profitable

Temple & Webster upgraded its FY23 earnings (EBITDA) margin percentage guidance from 2-4% to a 3-5% range, perhaps the catalyst behind Tuesday's share price re-rate.

Inventory levels heading into FY23 "remain strong with all metrics in-line or better than internal targets," the company noted.

Current operating conditions remain volatile, with July trading was down -21% year-on-year and August (to 14th) was down -17%.

Still, the company said these figures were "ahead of our internal estimates" and "month-to-month seasonality suggests a return to double-digit growth during FY23 once we finish lapping covid lockdowns from a year before."

Temple & Webster share price chart