Struggling online shopping site Kogan.com has snapped up online furniture site Brosa that was under administration for $1.5M, the move comes as the business struggles to make a profit selling appliances and consumer electronics.
Brosa entered voluntary administration on 14 December 2022, with Kogan.com acquiring the Brosa goodwill, intellectual property, and stock, but not its leases or other liabilities, on 21 December 2022.
As a June 2022 Kogan was bleeding, revenue was down 18%, net profit margin down 22.22% with Kogan paying for the problem furniture business from cash reserves.
Management have not said how the acquisition will help turn the business that is already suffering from excess inventory around with furniture set to take up more space in Kogan warehouses.
Earnings for the Kogan.com business slumped 87.4 per cent in 2022.
In their last trading update to the market management said sales for 2022 had hit $1.18bn, up just 0.1 per cent, with adjusted EBITDA of $19.1m, down 69 per cent.
It follows a recent update for the March quarter when Kogan.com revealed it had dipped into a $800,000 earnings loss for that period.
Kogan.com management claims that the acquisition delivers a lifeline to Brosa customers and will result in the relaunch of the Brosa.com.au.
The market was not impressed with shares falling another 1.5 percent, during the past year the shares that were trading at $24.97 five years ago have fallen 61.89%. Today they were trading at $3.27
Kogan.com has purchased the Brosa business (excluding any leases or liabilities) out of administration.
Management claim that consumers who have not had goods delivered and have paid for undelivered goods from Brosa, will be contacted with fulfilment options, which could result in customers having to pay Kogan to get their goods.
Kogan claims that Brosa.com.au will be relaunch with an expanded range of furniture.
During the past year Kogan has faced excess inventory and an increase in variable costs that saw profits fall $35.5 million into the red.
In a statement to shareholders, founder and CEO Ruslan Kogan said during the first year of the pandemic sales accelerated and bet the trend wasn’t going to stop. However, he was wrong and is now paying the price for poor judgement over stock, warehousing and the rising costs of goods and freight.
CEO Ruslan Kogan said “This led to us holding excess inventory and an associated increase in variable costs and marketing costs to sell through the inventory. profitability was impacted,”.
Brosa was founded in 2014 by David Wei and Ivan Lim, both directors have not commented about the failure of their business model thaty included online and in store sales.
In the past the directors told investors that their The Brosa platform allowed consumers to purchase designer products without many of the extra costs associated with traditional wholesale and retail furniture operations, they was no mention of goods being paid for and not delivered.
At this stage it’s not known what the debts in the business were when they were placed into administration.
In its early years, the business secured significant funding from prominent investors, including $2 million in AirTree Ventures in 2015 and a $5 million Series B funding round led by Bailador Technology Investments, AirTree Ventures and BMY Group in 2017.
By early 2021, Brosa had expanded to include showrooms in Melbourne and Sydney, as well as its e-commerce store, and more than 75 employees according to Smart Company.
