STOCK WATCH: Kogan’s Record Low. But is this the Rebound We’ve Been Waiting For?

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By Published On: March 2, 20220 Comments

Kogan's results may have been disappointing, but we're (finally) seeing a lift to the E-Com Index, with online retail lifting on the ASX.

Last Friday, the share price crashed to a new 52-week low of $4.50. In what has become a common post-reporting pattern, the slump occurred after its half-year results announcement.

In contrast to Adore, for example, whose share price dipped after what could be seen as a relatively encouraging start to FY22, Kogan’s results were objectively disappointing, and the crash not altogether unexpected. The company reported a 1.3% lift in revenue for the six months ending 31 December to $419.5 million and the business reported a 17.3% decline in revenue to $325.7 million following a decline in Exclusive Brands and Third-Party Brands revenue. 

Essentially, growth was from acquisitions and not from its core operations. It’s thanks to Mighty Ape (a business acquired in late 2020) that overall revenue didn’t decline. 

Unlike other companies on the ASX-Listed Index, its loyalty strategy (in which it invested heavily) let it down (a rise in customer numbers but a dip in revenue meaning customers are spending less, not more).  

Kogan continues to be plagued by the associated costs from warehouses and inventory management issues which impacted its profit margin during the first half. The company reported a net loss after tax of $11.9 million (down $35.5 million from its first-half profit of $23.6 million a year ago).

Kogan’s performance on the ASX in recent times has been dismal, to say the least. In fact, its poor performance meant that it was removed from the ASX200. So it makes sense that given its recent results announcement, investors would continue to sell off shares. Except this isn’t what has happened. While the market response was initially negative, and the company managed to find its way to another 52-week low, there was a slow rebound, and it closed at $5.92 on Tuesday. 

We queried a fortnight ago whether the ASX-Listed E-Com Index had bottomed, and it appears that it now has (she writes….with bated breath). 

Similarly, Booktopia has been struggling performance-wise on the ASX. Its H1 FY22 reporting announcement last Friday could have confirmed investor suspicions that profits would be impacted due to *waves hands* everything. 

Booktopia CEO, Tony Nash, said that first-half results reflected the challenges of meeting strong demand while lockdowns and supply chain constraints limited productivity and at the same time investing for the future. The group reported an EBITDA of $4.1 million for HY22 down from an underlying EBITDA of $8.0 million (adjusted for IP and underlying costs) for HY21, down 49%.

And yet, it has essentially remained steady, opening at $1.115 this morning, a 0.5% uplift. (It may be small, but it’s not nothing in the overall scheme of things). 

Source: Power Retail Australian Listed E-Comm Index, based on ASX reporting for the period

The flow-on effect is that others on the ASX-Listed E-Com Index seem to be benefitting from the change in investor sentiment too. Adore is up slightly at $2.19, which is a +6.8% swing over 7 days.

Even BikeExchange, which hit a low of $0.07 last Friday, is now at $0.08. Although it’s down 5.9% over the last week, making it the worst performer on the E-Com Index.

RedBubble is the best performer in the last week, up 11% to $1.97 at close of ASX on Tuesday. MyDeal is following closely. up 10.9% to $0.61. Cettire is up 4.3% in the same period (while Temple & Webster is steady at +0.8%).

While the overall landscape is complicated, to say the least, it seems that investors are once again finding favour with e-com. For the first time in a long time, E-Com companies are outperforming the ASX200. The ASX-Listed E-Com Index is up 2.2% over 7 days, while the ASX200 is down 0.9%. Could this finally be the recovery we’ve been waiting for?

Figures are current as at close of ASX on 1 March 2022. This is analysis only and not intended as investment advice.

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About the Author: Natasha Scholl

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