Temple & Webster Group's (ASX:TPW) fiscal 2026 outlook underscores a material worsening in the company's earnings base, with margins declining to around 3% as demand softens into the end of the fiscal year, Jefferies said in a Wednesday note.
The company said its current margin run-rates would result in fiscal 2027 earnings before interest, taxes, depreciation, and amortization nearly doubling to roughly AU$40 million. However, that "outcome lacks commitment and embeds aggressive margin expansion assumptions," according to Jefferies.
"What is evident from today's trading update is that despite [Temple & Webster's] discount model, the consumer's level of duress is severe with confidence reaching historical lows," Jefferies said, adding that the company "can no longer justify the insatiable desire for growth at the cost of margin."
Jefferies views Temple & Webster's AU$1 billion revenue target for fiscal 2028 as "increasingly aspirational," and doesn't see the company hitting that level within its forecast horizon through fiscal 2029.
Still, with retailers looking ahead at a rough fiscal 2027, Temple & Webster seems to be well positioned to capitalize on distressed peers, many of whom are far more capital intensive, the equity research firm said.
Jefferies maintained a buy rating on the company and lowered its price target to AU$8.95 from AU$14.50.
Temple & Webster Group's shares tumbled 5% in recent Thursday trade.