Kogan warns of earnings loss in March quarter
ONLINE retailer Kogan.com could be on track for its maiden full-year loss as a public listed company after the retailer revealed in a trading update on Friday that its earnings before interest, taxation, depreciation and amortisation has dipped into the red by $800,000 in the March quarter.
The update shows that the Kogan.com business arm reported an adjusted $3.5m pretax loss for the March quarter which was partially countered by a $2.8m earnings gain for its Mighty Ape business in New Zealand.
If this trend continues, or worsens, it could see Kogan.com report its first fullyear loss since it floated on the ASX in 2016.
Once again it looks like Kogan has built up its inventories of consumer goods expecting strong sales into the third quarter but these robust sales did not materialise.
The company founded by Ruslan Kogan, which has been grappling with bloated inventories, congested warehouses, rising costs and moderating sales over the last 18 months, has seen its earnings steadily decline after an initial burst of trading triggered by Covid-19 lockdowns and people shopping online.
This sent Kogan.com shares initially soaring as high as just under $25 in late 2020 but since then a string of profit downgrades and missed earnings targets has damaged its stock and has since fallen to under $5.
Kogan.com said in a trading update for the third quarter that gross profit had declined by 11.2 per cent year on year and that its earnings was now sitting at a loss of $800,000.
The Kogan business unit reported a March quarter adjusted profit of $9.6m in 2020, $5.5m in 2021 and now a loss of $3.5m in the March quarter of 2022.
Inventories were again a feature of the update. Kogan said inventories were $193.9m, comprising $169.5m in warehouse and $24.4m in transit as at March 31, reflecting a reduced level of inventory in transit and an intention to progressively recalibrate baseline levels of inventory over the coming year.
“Kogan.com had been positioning the business for continued elevated growth in gross sales, with levels of inventory and operational capability developed accordingly,” the retailer said. “In the third quarter, consumer demand did not meet these expectations, with gross sales down slightly by 3.8 per cent year on year.”
Gross sales were down 3.8 per cent to $262.1m.
Kogan suffered from bloated inventories following the first waves of Covid-19 as it stocked up heavily on products expecting strong consumer demand to continue as seen in the initial period of lockdowns but this never eventuated and as its rocketing sales began to flatten it was left holding stock.