Down 75%: Is this beaten down ASX retail stock a buy?

The share price of Temple & Webster Group Ltd (ASX:TPW) has been hit hard of late, dropping around 75% in the last 12 months.

So, what’s happening to this once buoyant ASX retail stock and most importantly, is it still a buy?

What’s happening in the homewares sector broadly?

In 2020/21, with almost all of us spending most of our time at home, homewares became a popular retail category. The pandemic essentially pulled years of demand forward.

Fast forward, and slower housing activity, rising interest rates, a consumer spending crunch and increasing shipping and energy costs have seen Temple & Webster’s share price tumble. Investors have turned away from this ASX retail stock in droves.

But a tough present doesn’t necessarily equate to a broken future. Structural growth remains, with the Australian furniture market predicted to grow steadily over the next decade, driven by renovation and lifestyle trends.

Short term pain, long-term gain for this ASX retail stock?

Despite some short-term pain, Temple & Webster offers solid fundamentals. But alongside current market headwinds, it is also facing a common business challenge – can it scale margins as it grows?

In February 2026, Temple & Webster reported H1 FY26 revenue of $375.9 million, up 19.8% on the prior corresponding period. However, it seems investors weren’t impressed with its profits, down 36%. Its gross margins also proved a sticking point, dropping to 30.5% from 32.4% in H1 FY25.

This margin decline is likely driven by a combination of factors. Rising customer acquisition costs, aggressive price competitiveness strategies and ambitious growth plans, including a recent expansion into New Zealand, are all in the mix.

Its focus has been on building market share quickly at the expense of short-term profit; a strategy outgoing CEO Mark Coulter has been very vocal about.

But investors responded resoundingly to its February earnings announcement. The ASX retail stock’s share price fell 25% in the aftermath.

In its May 2026 trading update, the company announced a rebalancing of profit and growth with a raft of pivots. These include new promotional activities, repricing across the catalogue and a slowing of fixed-cost growth.  

It seems the shift has proven effective so far, with Temple & Webster recording the most profitable April in its history.

With incoming CEO Susie Sugden (ex. Genesis Capital) set to take the helm in July, it is an interesting time for Temple & Webster. Coulter is set to stay on board as Executive Chair, and it seems likely that the current strategy will broadly continue to play out under new leadership.

Sugden’s marketing background and direct experience as a former Chief Marketing Officer at Temple & Webster should provide a steady hand.

So, is Temple & Webster a buy right now?

In my opinion, it’s an attractive entry point for patient investors. There is opportunity here for those who are prepared to weather significant volatility in the near term.

While discretionary spending is likely to continue to be slow throughout 2026, Temple & Webster is looking longer term. It has already shown it can execute on ambitious plans in an often challenging retail market. And if the current strategy is similarly executed, it will have a healthy market share to generate significant profits when consumer confidence returns.

The post Down 75%: Is this beaten down ASX retail stock a buy? appeared first on The Motley Fool Australia.

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Motley Fool contributor Melissa Maddison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Temple & Webster Group. The Motley Fool Australia has recommended Temple & Webster Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.