Kogan in plummet as profit shrinks

KOGAN.com chief executive Ruslan Kogan has admitted that the online retailer entered 2021 holding too much inventory just as customer demand began to drop, with logistics headaches and higher warehousing costs hurting profits.

It has also been forced into price promotions to help clear excess stock. “Our logistics costs and warehousing costs are in the short term affecting the profitability of the business,” Mr Kogan said.

The high-flyer of the online retail sector has reported a 24 per cent dip in earnings for the March quarter following years of strong growth, with accelerating profits followed by a rising share price.

For its flagship Kogan.com business, adjusted earnings fell even more sharply, down more than 42 per cent as it booked container shipping charges of $3.9m due to warehouse bottlenecks and $5.1m in payments for its recently acquired New Zealand business Mighty Ape.

Kogan.com shares slumped 14.3 per cent to $10.69 as investors digested the trading update, which revealed profit growth of close to 200 per cent last year had been thrown into reverse. It showed adjusted earnings were falling.

Kogan.com shares were issued for $1.80 in 2016 and traded as high as $25.57 last October.

Like many retailers, Kogan.com is being affected by shoppers reverting to more normal habits after the online boom sparked by the COVID-19 pandemic.

The impact on profit is most stark in Kogan.com’s adjusted earnings before interest, tax, depreciation and amortisation, which has switched from booming growth to a drop in profitability in the space of just a few months. Formerly heady earnings growth of almost 185 per cent in the December half year has turned into an earnings decline of more than 24 per cent for the March quarter.

Mr Kogan also warned that cost inflation is running through the sector too, especially for products sourced from Asia, with the wholesale prices for electronic goods rising strongly.