What Next For Kogan As Stock Level Climb & Cash Reserves Fall?
Catch is backed by Wesfarmers and JB Hi Fi has millions in the bank but what about Kogan whose stock has fallen from $25 in 2020 to $11 last week?
The Melbourne based online retailer only has $13 in spare cash, despite on external borrowings, analysts were expecting that amount to be closer to $40M with
And that also hurts cash flow. For the year, Kogan.com ended with net cash of $13 million against consensus expectations of about $40 million and raising additional cash now is a high risk especially when one is carrying up to five months of stock according to analysts.
One analyst told clients that while inventory has remained flat, sales and cost of goods sold have fallen, so inventory days have popped to 150 days.
Another issue confronting the brash CEO Ruslan Kogan, who’s gone remarkable quiet lately similar to another attention grabber John Winning whose business is also facing problems, is that Kogan’s sales which he was telling the market last week had risen 8% Vs JB Hi Fi’s 8% fall have actually fallen 14% in real terms when the revenues from recent acquisition Mighty Ape was actually stripped out according to analysts who are now becoming wary of the growth trajectory for the business.
Businesses like Kogan are facing increased shipping costs and a shortage of processors, so holding stock could be a plus claim insiders.
The Financial Review recently reported that it’s “hard to see the bull case” for Kogan going forward.
Pre the end of the financial year Kogan discounted heavily in an effort to clear the clear excess stock, this would have put pressure on margins at a time when the market is slowing due to shortages and consumer about the impact of lockdowns.
Currently Kogan is the market’s fourth most-shorted stock. In May, and after they issued a profit downgrade, admitting it miscalculated demand, added unnecessary costs to help its expansion, and was slugged with fees related to overstocking, and is now being forced to discount heavily.
Meanwhile archrival Catch and the likes of Big W as well as Winnings own Appliances online are working to control their stock levels by not taking risk on the stock they list, instead they are operating consignment models a move forced suppliers such as Sydney based Ayonz to borrow money from financier ScotPac as they are now having to carry stock longer.
Shares that were trading at $25 in the 4th quarter of 2020 are now down to $11 and tipped to fall further.