👉 Background: Temple & Webster, founded 2011, had a few choppy years after it listed on the ASX in late 2015. In fact, its share price dropped by nearly 75% in the first 3 months of listing.  

👉 What happened: But after weathering the storm, they have grown to become the largest online furniture retailer in Australia, selling more than 200,000 products. Now, Temple & Webster have announced that their sales have risen by 24% in the past 6 months, largely thanks to a big increase in purchases of couches and bathroom fixtures.

👉 What else: As a result of this performance, Temple & Webster’s share price has jumped more than 50% in the past 12 months. That’s obviously thanks to the increase in its sales… but more importantly its profit margin.

What's the key learning?

💡A profit margin represents the portion of a company's revenue that it gets to keep as a profit - after subtracting all of its costs. In retail, profit margins are notoriously tight — like supermarkets who often make just a few cents on every dollar.

💡Temple & Webster pulled off a profit margin of 4.2% in the last 6 months - way above their expected 1-3%. A growing margin means they’re not just selling more stuff; they’re making more money from what they sell.  

💡That might be from:

• Reducing the raw material costs in their goods:
• Getting more efficient with AI for their customer service - as they claim to be doing
• Charging higher prices without losing customers
  

So, even in a sector where margins are often razor-thin, even small improvements can become significant gains.