Kogan shares slump as growth stalls

Kogan shares slumped more than 22 per cent on Monday after the company said its gross profit growth had turned negative.

Ruslan Kogan, founder and CEO of Kogan

Kogan shares slumped more than 22 per cent on Monday after the company revealed its gross profit growth turned negative over the festive December quarter.

Although the online retailer’s gross profit rose more than 9 per cent in the first half of the financial year, that implied a sharp downturn from growth of 28 per cent in the first quarter, compared to the prior corresponding period.

The news sparked a heavy sell-off among investors, driving Kogan shares to a more than three-month low of $6.15 in early trade. They closed down $1.76, or 22.2 per cent, at $6.23.

Monday’s share price plunge came only two weeks after the company traded at a one-year high of $8 on January 8.

But chief executive Ruslan Kogan told The Australian he was unfazed by the retail conditions, which had resulted in the collapse of several retail groups this month.

“We’re not a good yardstick for general consumer confidence because we’re a fast-growing business in a rapidly changing e-commerce market,” Mr Kogan said.

“Our business reported a record half of gross sales and gross profit. On top of this, Black Friday and Boxing Day sales were record-breaking.”

Gross sales growth for the half, of 16 per cent, was steady ­between the first and second quarters.

Royal Bank of Canada analyst Tim Piper said although Kogan’s trading update demonstrated that most of the business was tracking in line with expectations, a “key miss” was in the exclusive brands segment. The segment’s sales rose 17 per cent for the half, following growth of 35 per cent in the first quarter.

“We had previously upgraded our forecasts on expectations of a stronger first-half gross profit growth figure than what was reported in today’s update,” Mr Piper said. “While there are positives in the update including higher Marketplace sales, stronger cash flow than expected and continued reduction in operating costs, we note Kogan’s share price has rerated materially in recent months.”

Meanwhile, Kogan attributed a “material”, but unspecified fall in third-party brand sales for the half to the growth of Kogan Marketplace, which enables other brands to sell their products on its website. Gross sales for the Marketplace segment rose 44 per cent between the first and second quarters.