Shares of online furniture retailer Temple & Webster surged nearly 35 percent on Friday, marking the company as the top performer on the sharemarket despite ongoing challenges in sales growth. The rally followed a sharp 10 percent drop the previous day, triggered by a profit warning from competitor Nick Scali that highlighted a slowdown in consumer spending in the furniture sector.

At its annual general meeting, Temple & Webster provided a trading update revealing that while sales growth remained subdued, the company’s shift away from heavy promotions and discounting has led to improved profit margins. New chief executive Susie Sugden explained that revenue had declined intentionally due to reduced promotional activity and price increases on select product ranges.

“Contribution margin is growing, while revenue is down,” Sugden said, noting that trading had improved since the company’s August update and that the business was successfully enhancing profitability in line with its strategic goals.

For the period from July 1 to October 19, Temple & Webster reported an 8 percent decline in revenue compared to the same period last year. However, contribution margin dollars rose by 16 percent during that timeframe. Sugden added that the revenue run-rate for the period between the August update and the current date showed an improvement to a 4 percent decline, up from 13 percent down at the previous report.

Looking ahead to fiscal 2027, the company anticipates cycling through periods from mid-February onward with promotional levels similar to those currently in place, which Sugden said should enable a return to growth under the firm’s strategy focused on sustainable improvements in both top-line and bottom-line results.

Temple & Webster projected earnings between $33 million and $40 million for 2027, representing a 50 to 80 percent increase over the 2026 results. Shares closed at $4.43, up 33.4 percent on the day.

Analyst Sam Teeger of Citi noted that early insights from management’s discussions around brand marketing, private label expansion, and artificial intelligence initiatives suggested a potential for revenue growth to recover without fully sacrificing the margin benefits gained so far. Still, he cautioned that the key uncertainty remained whether growth could resume once promotional comparisons normalize in February.