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BREAKING NEWS: Kogan Shares Crash 24% Margin Erosion Hurting Bottom Line

Shares in online retailer Kogan.com plunged more than 24 per cent after the Company admitted that they are facing the same margin pressure as other shop front retailers, they have also said that several online operators are still not collecting GST revenue.

CEO Ruslan Kogan blamed the margin decline on competition from foreign websites not charging GST, along with a weaker Australian dollar. At Midday, Kogan shares were down 24 per cent at $3.54, while the ASX 200 was about 1 per cent higher.

The margin pressure is not unexpected with appliance distributors and brands such as Electrolux now canvassing price rises in an effort to lift revenues and margins.

Kogan is saying that despite new GST laws on low-value eCommerce import transactions that were introduced in July some overseas online traders are still not charging GST.

Kogan says widespread avoidance of GST by foreign eCommerce sites had since become apparent since the introduction of new laws relating to GST.

“At this stage, the company is unable to determine whether the recent widespread avoidance of GST will be temporary,” it said.

The Company reported that revenue in its premium brands business line lifted 15.7 per cent for the first quarter, while partner brands revenue rose 73 per cent.

ChannelNews understands that several premium brands who did not do business with Kogan before are now looking to work with Kogan directly.

Kogan said global brands revenue has been affected by foreign websites selling into Australia avoiding GST. Revenue decreased 27.4 per cent for the September quarter.

“While growth in the global Brands division presents a challenge to the business in the short term, we have built a resilient portfolio of businesses, with the core divisions of exclusive brands, partner brands and Kogan Mobile continuing to show healthy growth,” Kogan founder and chief executive Ruslan Kogan said.

Kogan said the number of active customers on its site increased 41.6 per cent to 1.45 million customers at September 30, compared to 1 million at the same time last year.
“We continue to execute our long-term strategy to grow our eCommerce footprint and make the most in-demand products and services more affordable for all Australians,” Mr Kogan said.

“We are better prepared for this busy Christmas sales period than we’ve ever been with warehouses in Victoria, New South Wales, Queensland and Western Australia fully stocked with the most in-demand products.”

In August, Kogan delivered a net profit after tax attributable to members of $14.1 million, up 110.4 per cent from a pro forma $6.7m last year, when one-off IPO related costs had a $3m impact.