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Kogan Margins Squeezed Amid Record Customer Spike

E-commerce behemoth Kogan.com has announced record post-IPO monthly growth in active customers for March, whilst “successfully navigating” the operational disruptions of COVID-19. The news follows reports of price gouging during the pandemic.

Despite a 50% jump in March sales, and 30% leap during the March quarter, sales failed to impact earnings, with adjusted EBITDA notching a 4% lift amid a 37% jump in costs.

As work-from-home consumers snatched up exercise gear and office equipment, the e-commerce conglomerate significantly ramped up its marketing expenditure.

The strategy saw active customers soar 13% YoY over the quarter to 1.8 million – up 62,000 in March, its fastest since IPO.

For Q3FY20, gross profit lift over 23% YoY, whilst revenue climbed 6%. Kogan Marketplace gross sales increased over 7% versus the prior December quarter.

The e-tailers claims its pipeline of new sellers for Kogan Marketplace “remains strong”, with the number of new sellers yet to go live (in ‘integration phase’) more than 50% the number of current active sellers. Current active enquiries from potential new sellers is said to be more than three times the number of current active sellers.

[ASX: Kogan.com]

[ASX: Kogan.com]

Despite incurring a 37% jump in operating costs during the period, management claims the strategy to increase active customers is expected to have long-term business benefit.

As at March 31 2020, inventories were $79.3 million, with $63.8 million in warehouses and $15.5 million in transit. 

Cash was at $ $47.8 million, with the debt facility drawn to $26 million.

Disclosed in its recent business update, Kogan has acknowledged a “cyber attack” on one if its delivery partners, resulting in the loss of tracking information for thousands of items in transit to customers. 

Certain products sold by Kogan.com in New Zealand were also temporarily suspended for “short periods” due to COVID-19 and government policy changes.

“Over the past 14 years we have built a portfolio of businesses with world-leading supply chains,” claims Kogan.com founder and CEO, Ruslan Kogan.

“We have a rapid fulfilment and logistics capability that has allowed us to support our community during the COVID-19 pandemic with fast delivery of essential items.”

As online competition continues to ramp up, Kogan.com is set to further invest in its proprietary marketplace platform, to expedite new seller onboarding via increased automation and self-service capabilities.

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