Kogan’s ‘Bet’ for Online Growth Backfires as Sales Slip

The online retailer reported a 0.1 percent increase in its gross sales to $1.18 billion. Its revenue has declined eight percent to $718.5 million, with gross profit dipping 9.3 percent to $184.4 million.

Adjusted EBITDA was $18.9 million, which is largely due to the increased operating costs from COVID-19-related excess inventory and ongoing fluctuating customer demand.

Group active customers are currently at 3,972,000. In its previous update, the online retailer reported an active customer base of over four million (4,099,000).

“For more than ten years, e-commerce grew in Australia at a consistent and stable rate. This enabled Kogan.com to plan for growth in a measured and precise way,” said Ruslan Kogan, CEO of founder of Kogan.

“The consistency of this growth was rocked by the onset of the COVID-19 pandemic when customers turned to Kogan.com, and we found that — almost overnight — our business started to double in sales. Kogan.com quickly became the destination that millions of Australians relied on for the most essential items.

“This acceleration of sales continued for many months in the first year of the pandemic, and we bet that the trend was not going to stop. To ensure we could be there for our customers when they needed us most, we increased both our range and volume of inventory, as well as our logistics footprint to match this expected level of growth.

“We were wrong,” said Kogan. “As the true volatility of the situation settled in — caused by stay-at-home orders and lockdown ambiguity — e-commerce did not continue to grow as anticipated.

“This led to us holding excess inventory and an associated increase in variable costs and marketing costs to sell through the inventory. As we’ve discussed at length through regular updates this past year, profitability in FY22 was impacted.”

Kogan’s shares have dipped 14.91 percent in the last five days and 1.97 percent since opening on Wednesday morning.

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