Home upgrades a boon for Temple & Webster, Bunnings, Officeworks

Today's working from home (WFH) reality has driven a surge of activity for online furniture retailer Temple & Webster (ASX: TPW), as well as bricks-and-mortar icons such as Bunnings Warehouse and Officeworks.

TPW shares surged 16 per cent this morning to $3.98 each after the company reported year-to-date revenue (1 January to 24 April) was up a whopping 74 per cent.

The e-commerce group has played a role in helping people set up their homes as multi-purpose spaces, including spaces for work and exercise.

"Being an online-only business, we can scale quickly and are responding to the increased demand by expanding our customer service team," says Temple & Webster CEO and co-founder Mark Coulter.

"The team has done an amazing job in meeting the needs of our customers during this period, while maintaining our high levels of customer satisfaction, all while working from home.

"While the current global situation makes it hard to predict what will happen in the short term, we remain bullish about the longer-term shift from offline to online driven by changing customer preferences and demographics."

TPW emphasises it is profitable and cash flow positive, with a capital light business model and a debt-free balance sheet with a current cash level of $20 million.

Home upgrades were also a key driver for growth for certain subsidiaries of Wesfarmers (ASX: WES), which provided an encouraging market update today for Bunnings and Officeworks.

The two traditionally offline retail chains have enhanced their digital offerings while responding to the substantial increase in online sales. This includes implementation of Drive & Collect to enable contactless carpark collection.

Some Bunnings stores in New Zealand remain closed in line with the country's stricter measures against Covid-19, but in Australia the business along with Officeworks has experienced significant demand growth.

This has been sparked by customers and their families spending more time working, learning and relaxing at home.

However, given the disruption to usual customer shopping patterns and potential future changes to government measures, Wesfarmers has expressed uncertainty about whether these higher levels of sales growth will continue for the rest of FY20.

Unlike Temple & Webster, WES shares only rose 1.36 per cent this morning to $38.13, which may have to do with a more sobering reality at the company's Kmart and Target stores.

Three Kmart locations have been turned into 'dark' stores to support a growing online business, and sales growth at both Kmart and Target was broadly in line with with the levels achieved in the first half of the financial year, supported by strong growth in online sales.

Wesfarmers also notes pleasing progress continues in its e-commerce player Catch, with very strong growth in gross transaction value in both the marketplace and in-stock offering.

But in recent weeks a decline in customer footfall in shopping centres and ongoing weakness in discretionary categories - particularly in apparel - have led to a moderation of in-store sales momentum at Kmart while it has declined significantly at Target.

The parent company believes these trends are expected to persist while social distancing and isolation measures remain in place, and while many tenants and activities within major shopping centres are not operating. This is set to lead to a material impact on sales and margins for both divisions.

Updated at 10:55am AEST on 28 April 2020.