Kogan Suffers 87% Profit Collapse Due To Bloated Inventory
Online retailer Kogan.com has seen its profits dive to just $3.53 million, falling by 86.8 per cent, as bloated inventory and increased logistics costs decimate the company’s earnings.
As a result, it will not pay a final dividend to shareholders, choosing instead to converse cash for further business investments.
Revenue for 2021 rose 56.8 per cent to $780.74m, but the company was unable to repeat its 56 per cent leap in net profits for 2020.
The company incurred $7.7 million in logistics demurrage charges due to warehousing and supply chain issues, $12 million in provisions to cover final payments for buying out New Zealand retailer Mighty Ape, and a $15.6 million in “equity-based compensation expenses” for options awarded to co-founder Ruslan Kogan and David Shafer.
Kogan enjoyed the hike in online retail that came with the COVID-19 lockdowns, but was overly aggressive in its growth, expanding its warehouse network and purchasing far too much stock. This led to a run of heavily-discounted products in the first half of 2021, which ate into profits.
“The first 18 days of August 2021 have shown a strong acceleration above July 2021 performance, with gross sales 24.5 per cent above July, and gross profit 25 per cent above July,” the company said.
On the positive size, the company’s gross sales grew to $1.8 billion, the first time Kogan has cracked the billion-dollar mark.