-Revenue growth likely to taper as a result of reinvestment
-But can this level of category expenditure be maintained?
-Australian homewares/furniture at early stage of e-commerce adoption
Long-term opportunities lie with expanding categories and the relentless shift of customers to e-commerce. The company reported first half revenue of
There was a difference to "check-out" revenue, which was up 124%, but this was a timing issue and, had the deferred revenue been delivered, Macquarie notes earnings would have been closer to its forecasts.
Part of the shortfall in broker expectations
Moreover, the company's update on January has signalled sales were up over 100% and the broker forecasts second half sales growth of around 69%, including the cycling of strong comparables in the fourth quarter.
Despite some bottlenecks Macquarie observes suppliers are managing to keep up and
One aspect of the results that disappointed the broker was operating cash flow, which was not at the levels seen in FY20, and stemmed from the investment in private label, although this is expected to stabilise over time.
Revenue growth will taper off as 2021 progresses but Macquarie believes the market understands this will be the result of reinvestment. The main issue, therefore, is the longer-term potential and the timeframe over which growth can be delivered.
The broker remains cautious, retaining a Neutral rating with a
Investment Initiatives
The main initiatives slated for the second half include an Android app, visual search and augmented reality 3D product models, as well as after-hours service. The platform is highly scalable, Macquarie points out, and could handle multiples of existing ranges.
In allowing for the increased reinvestment in growth initiatives,
The net cash position increased to
Goldman Sachs, with a Buy rating and
The broker is attracted to the tailwinds in online commerce penetration and notes the company's leading position in its category, and the significant room for further growth. Furthermore, growth opportunities are underpinned by the fact the Australian homewares and furnishings market is at the early stages of e-commerce adoption compared with similar markets offshore.
In calculating the market potential, Goldman Sachs compares
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