Kogan posts second loss but says adjusted earnings for July were positive

The online retailer says it has slashed its once bloated inventory and is delivering better quality earnings as for the first time the majority of sales came from its own platforms.

Kogan.com co-founder and CEO Ruslan Kogan. Aaron Francis

Shares in Kogan.com plunged after it delivered another bruising result with a full-year loss of $25.8m in the 2023 financial year as it works to shed an oversupply of retail stock.

However, adjusted earnings were positive in the month of July while its ambitions for the majority of its sales and gross profits to come from its marketplace platform - not Kogan.com inventory - were met.

The dip into the red was down from a loss of $35.457m for 2022 while no dividend was declared. The company’s shares fell 11.2 per cent or 64c to $5.07 on Tuesday.

The online retailer, whose shares have risen 50 per cent in the last 12 months as its business operations slowly improved and it shaved costs, reported that its inventory position had been slimmed greatly.

The company had suffered from bloated inventories in the second year of the pandemic causing havoc with its logistics, warehousing and extra warehousing costs that heavily dented its profitability and helped sink it to its maiden loss as a public company.

A decision previously to load up heavily on stock to cater to customer demand driven by Covid-19 lockdowns failed to materialise and left Kogan.com with unwanted inventory that had to be discounted.

Ruslan Kogan. Picture: Julian Kingma

The company said on Tuesday it had corrected its inventory down to $68.2m as at June 30, 2023, a reduction of more than 57 per cent and that it was entering fiscal 2024 with inventory levels aligned to the current levels of consumer demand.

Kogan.com said a key achievement was that for the first time, gross sales from its platforms (Kogan Marketplace, Kogan First, Kogan Verticals ) made up the majority of total sales for the company, with the same for its gross profit.

Kogan.com platform sales contributed 57.3 per cent of gross sales and 71.2 per cent for gross profit.

“Fiscal 2023 marked a significant milestone in the history of our business. For the first time ever, Kogan.com’s platform-based sales contributed the majority of our gross sales and gross profit,” Kogan.com chief executive Ruslan Kogan said.

“Importantly this has enabled us to deliver better quality earnings as we successfully transitioned into a higher margin, lower risk, platform and software based business while offering our customers increased competition and improved value,” said Kogan.com chief executive Ruslan Kogan.

At the end of the year active customers were 2.945m, comprising 2,19m for Kogan.com and 755,000 for its New Zealand business Mighty Ape.

Kogan.com’s total net cash balance - after loans and borrowings - increased by $34.2m to a total of $65.4m at the end of fiscal 2023. The year included the payment of Tranche 3 of the Mighty Ape acquisition, being $14.2m, repayment of loans and borrowings totalling $36m, share buy-backs of $10.8m and the payment for the acquisition of some of the assets of furniture retailer Brosa for $1.5m.

Kogan.com did not provide an earnings guidance but it said July 2023 unaudited management accounts showed adjusted earnings of $3.5m.

“Having returned Kogan.com to sustained and increasing underlying profitability in the second half of 2023, we look to fiscal 2024 with confidence. We expect the number of Kogan First Subscribers to accelerate following the expansion of the program, continued growth in our verticals, a return to growth in Kogan Marketplace as well as our recently introduced advertising platform, the launch of a new Vertical in New Zealand and continued improvement in our product division’s profitability.

“These initiatives are expected to underpin continued growth in the business and support ongoing growth in shareholder value,” Mr Kogan said.