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It’s Official: Kogan An Online Shopping Basket Case

Kogan has become the basket case of the online shopping world, profits are sinking their warehouses are full of stock which are struggling to sell despite massive stock shortages among most retailers.

Their ASX announcement today saw  the Kogan share price crash to a multi-year low of $4.00 after the online retailer reported a decline in sales and losses.

Facts

Kogan gross sales down 3.8% to $262.1 million

Gross profit down 11.2% to $41 million

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) down 110.5% to a loss of $0.8 million

Kogan Mobile executive director David Shafer, Vodafone Australia chief executive Inaki Berroeta and Kogan founder and chief executive Ruslan Kogan after they struck a deal with Vodafone. has followed its $1 billion deal with TPG Telecom by partnering with online retailer Kogan, which will use the telco giant’s network to again sell mobile plans under its name.

The disastrous result comes as shoppers head back into retail stores who are making a profit and growing despite facing the same supply chain disruptions that Kogan is facing.

Kogan.com founder and chief executive Ruslan Kogan who has pocketed tens of millions of investor money after the Company floated, claims that a general slowdown in e-commerce across the market in the March quarter has contributed to his problems.

“Over the coming year, the company will be recalibrating its organisational costs in line with current growth levels to support a return to the historical operating margins previously generated,” Mr Kogan said.

Kogan, which has been grappling with bloated inventories, congested warehouses, rising costs and moderating sales over the last 18 months while competitors such as JB Hi Fi, The Good Guys and Harvey Norman have seen their business soar due to them having the management that can handle volatile market conditions that Kogan is struggling with.

“There is a big difference between woke management and experienced management” said one supplier.

During COVID Kogan has seen its earnings steadily decline after an initial burst of trading triggered by Covid-19 lockdowns and people shopping online.

This sent Kogan.com shares initially soaring as high as just under $25 in late 2020 but since then a string of profit downgrades and missed earnings targets has damaged its stock and has since fallen just $4.00 today.

At an adjusted earnings before interest, tax, depreciation and amortisation level, the overall business made a loss of $800,000 in the March quarter.

The Kogan.com e-commerce unit made a loss of $3.5 million at an adjusted EBITDA level, but this was partially offset by the Mighty Ape business in New Zealand which made a profit of $2.8 million.

In its March quarter trading update, inventory levels were still high at $194 million, made up of $170 million in warehouses and $24 million in transit.

Kogan claims that there has been a reduction in inventory levels in transit.

Analysts Motley Fol said that Kogans problems was driven by weakness across its core Kogan Exclusive Brands and Third-Party Brands categories. They reported sales declines of 18.8% and 21.8%, respectively.

This offset a positive performance from the Kogan Marketplace business, which reported a 19.8% increase in gross sales for the quarter.

Though, it is unclear if the growth of this side of the business is due to it cannibalising sales from other categories.

Once again, management failed to predict this softening of sales and positioned its inventory for elevated growth in gross sales.

However, it concedes that consumer demand did not meet these expectations.

This left it with high inventory levels.

More to follow:



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