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Kogan Sales Figures Won’t Hold Up Post Pandemic, Warns Morningstar

Kogan shares have been “materially overvalued”, a financial services firm has warned, with investors wrongly expecting the current online sales surge to last.

Morningstar believes that Kogan’s current high sales figures, driven by a surge in online spending during the COVID-19 pandemic, will drop as restrictions are lifted and customers go back to in-person shopping.

As reported in the Australian Financial Review, Johannes Faul, director of equity research at Morningstar, has valued Kogan at $10.50 a share – under two thirds of its current $16.96 price.

“Near term we expect customers to return to physical stores as restrictions ease, and higher unemployment to result in lower household discretionary income and consumer sentiment.

“Longer term we expect Amazon Australia to continue to aggressively take market share and many omni-channel retailers to become increasingly competitive online,” he said.

The news comes amidst a bunfight at Kogan over controversial remuneration packages for CEO Ruslan Kogan and CFO David Shafer. At current share prices, the packages would be worth around $110 million in 2023; however, Morningstar’s valuation of $10.50 a share would put them closer to to $63 million. Though shareholders approved the packages, 43.7 per cent were opposed, delivering a first strike.

While Kogan’s average gross profit growth in July and August 2020 was 163 per cent, this dropped to 101 per cent in September-October. Wesfarmers’ Catch outran its sales over the first four months of FY21 by 15 percentage points.

Morningstar expects continued falls as consumers return to travel and leisure spending. The online retailer’s EBITDA is tipped to grow by more than 50 per cent in 2021, but only six per cent in 2022.

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