Overstock Headaches Eat Into Kogan Profits
Online retailer Kogan has seen a drop in profits despite growth across the board in sales, active customers, and revenue.
While sales were up more than 47 per cent, revenue more than 65 per cent, gross profit more than 54 per cent and active customers more than 77 per cent across both Kogan.com and Mighty Ape, the company saw a 24 per cent drop in adjusted EBITDA over the first quarter of the 2021 calendar year.
Kogan blames this on a drop in customer demand from the nine months to December 2020, which meant the company had to pay high extended storage and demurrage fees on the large amount of inventory it ordered.
The company says it is working to resolve its inventory issues by increasing promotional activity, and says the storage and demurrage fees are expected to be resolved from May.
According to CEO Ruslan Kogan, the business has been able to deliver strong growth while adapting to changing conditions.
“We have maintained a strategy throughout the pandemic to be there for our customers during a period they need us most. We have continued to invest in some of the most important consumer goods – delivering essential items quickly to homes around Australia and New Zealand.
“While short term trading conditions can fluctuate, we remain focused and committed to our long term vision. Kogan First is an important part of our long term strategy, and we are proud to have increased our investment in Kogan First membership benefits to more than $2.5 million in the quarter,” he said.
The drop in demand may support conclusions by financial services firm Morningstar, which warned late last year that Kogan’s shares were overvalued and that sales would not hold up post-pandemic.