TPW earnings call recap: re Brosa BTI investment

I listened to the Temple and Webster earnings call today, to help understand BTI’s investment in Brosa whose valuation was upgraded in the latest results. TPW, I don’t follow, but at a top level, the results look pretty good, FCF, cash on hand, debt free.

Points relevant to both businesses from Q&A

• Aust 15% furniture sales online, US 30% and growing
• FY 23 sales yoy July down 21% Aug 17% down, however figures are ahead of the company’s expectations, whatever that was? Undisclosed.
• Inventories are bloated, some suppliers are trying to move stock, may offset some inflation/cost pressures
• FY23 seems to be tracking ok, but admit no idea how it will pan out, impossible to forecast.
• Freight logistics are complicated/expensive for large box furniture deliveries, so there is a bit of a barrier to entry.  Retailer size feeds into better freight rates and optimization. (I live in reg Vic and can get deliveries from Brosa and TPW. However, I have had issues with other online retailers who don’t service the area, 2hrs from Melb.)

Overall, the tone was positive, careful expense control and holding cash for unforeseen circumstances. A bit of a pullback in marketing/promo expenses to help maintain and grow margins.

TPW’s stated goal is to be the biggest retailer in the online homewares space, so where does that leave Brosa? I think there is room for at least 2 major players in the space, perhaps 3. Customers like choice and TPW’s range is vast with no shortage of options.  However, customers like to compare products from different retailers, styling and cost before purchasing an item that is expensive.

A couple of things that differentiate Brosa

• Smaller range, well styled
• Quick responses to questions and free fabric samples sent out
• Competitive price points,
• IMO, styling, quality, and price points are better than Freedom. Freedom also had terrible reviews during covid problems with online orders, usually due to delivery.
• Showroom in Melb and Syd. Think this is a great feature for Brosa. I know if I’m buying a couch, I want to sit on it. I have visited the melb showroom a couple of times, very busy.
• Brand recognition?? Seems low to me, how many people do you know are aware of Brosa compared to TPW?  In my questioning, everyone is aware of TPW, Brosa, not at all. Interestingly when TPW first floated, and I asked people the same thing, TPW had no brand recognition then either.  In the call TPW said their cost of customer acquisition had increased by 20%, so I suspect Brosa’s is up too, it may be expensive growing the customer base?

not held