The TEMPLE WEB FPO (ASX: TPW) share price has been absolutely hammered today, falling 69.1% to just 19.5 cents. That's a loss of 82.3% since their offer price of $1.10 just over two months ago.
What Happened?
TEMPLE WEB FPO, or Temple & Webster Group, is an online retailer which specialises in homewares and furniture which listed its shares on the ASX as recently as December 2015. Notably, its shares were crushed on the day of their IPO which, at the time, I said may have been partially due to its business model:
"It's also possible that investors are being cautious not to get too excited about the prospects of Temple & Webster. Indeed, the company's business model is reliant on consumers letting go of the need to see and touch items of furniture in-store before making a purchase."
Today's fall, however, came after the company released its earnings results for the first half of financial year 2016 this morning. Needless to say, the results weren't pretty.
It reported first-half revenue of $32.1 million, but put a downside risk estimate of up to 10% on the full-year prospectus revenue guidance of $76.2 million. Worse yet, it also put a $5.5 million, or 65%, downside risk on its guidance for $8.5 million in earnings before interest, tax, depreciation and amortisation (EBITDA).
Now What:
Temple & Webster Group's results come in stark contrast to those from companies such as Fantastic Holdings Limited (ASX: FAN) and Nick Scali Limited (ASX: NCK), which sell furniture items in-store. Nick Scali reported 11.6% like-for-like sales growth for the same period, while Fantastic Furniture said its same-store-sales were up 15.7%.
Of course, sales across the industry have risen strongly in recent years, largely boosted by surging house prices. With growth in house prices now slowing down however, this could act as a headwind for the industry as a whole and this is worth investors keeping in mind.
Temple & Webster is not immune from this trend. Based on today's terrible results, and guidance for more pain to come, I think it would be wise to steer clear of the company, for now at least.
