Scaling Problems See Kogan.com Shares Tumble On ASX
Kogan.com shares have fallen, after the online retailer blamed a combination of warehouse logistics issues, excess inventory, shipping fees, rising tech good prices, and increased advertising costs for its expected profit shortfall for FY21.
Today the company released new earnings guidance that shows it will land 11-18 per cent underneath previous FY21 forecasts.
Kogan.com shares are now down shares were down 12 per cent to a 12-month low of $8.91.
Kogan.com’s adjusted EBITDA was now $58 million-$63 million, compared to adjusted EBITDA of $49.7 million for 2020. These 2020 results were up 57.6 per cent on 2019.
“The company has learnt valuable lessons over the last few months, including many key strategies on how to better scale operations of a large fast-growing e-commerce company,” Kogan.com said today.
“In order to provide the delivery experience customers desire, Kogan.com built up its inventory levels from late 2020, which has caused high warehousing costs that are continuing.
“Customer demand in April 2021 remained consistent with the levels seen in the three months to March 2021, and below the levels seen in the nine months to December 2020.
“The company has been progressively working towards optimising the inventory position to reflect current market conditions by increasing promotional activity, which has led to lower near-term gross margin and higher near-term marketing costs.
“Kogan.com is expected to return to normal inventory levels (relative to the size of the business) and marketing spend as the current inventory is progressively reduced over the coming few months.
“At the same time, cost price inflation of many consumer products is being observed in respect of products that are currently being planned for reorder in advance of the peak Christmas trading period. This price inflation is being driven by COVID-19 market dislocations, together with inflation in international shipping costs.”
Despite this cluster of issues, Kogan.com is confident of a bright future.
“The board looks to the future with confidence as the business has invested in key strategic initiatives and has a strong level of in-demand inventory heading into the first half of fiscal 2022 while observing price inflation through global supply chains,” it continues.
“The initiatives that the company has put in place to address the rapid scaling of a large e-commerce company are expected to drive continuous customer experience improvements in fiscal 2022.”