Kogan.com axes dividend as profit tumbles 86.8 per cent

Kogan.com’s share price slumped after it cancelled its final dividend and unveiled a near 90pc slide in profit.

Ruslan Kogan’s retail company has scrapped its final dividend after profits sank.

Investors have reacted savagely to an almost 90 per cent collapse in online retailer Kogan.com’s annual profit and its decision to cancel its final dividend at a time when online retail is booming, selling down Kogan.com’s shares by 16 per cent.

With the market bracing for a poor result from the former market darling given a number of profit downgrades this year caused by bloated inventory and millions of dollars in extra warehouse and logistics costs, the absence of a dividend looks to have soured the reaction even further.

Shares in Kogan.com had rallied as much as 500 per cent through Covid-19 thanks to the explosion in popularity of online shopping that took its stock to above $25, but profit warnings and a pullback in sales have bruised the share price.

After it released its full-year results on Tuesday, which showed an 86.8 per cent collapse of its profits for fiscal 2021 to $3.5m, Kogan.com shares slid 16 per cent before closing down $2.07, or 15.77 per cent, at $11.06.

The final dividend was cancelled as the company decided to preserve cash for future growth opportunities.

A key culprit of the slimmer profits was Kogan.com caught out holding too much stock in the warehouse earlier this year, just as sales moderated, and it forced to offer discounts and promotions to clear the congestion, which shaved margins. This overstock situation caused logistics headaches including demurrage charges (a charge payable to a shipping company on failure to load or discharge the ship within the time agreed) of $7.7m as a result of Covid-19 related warehousing and supply chain interruptions from late 2020 to April 2021.

Also trimming its once bumper profitability was the impact of a controversial $80m options package awarded to founders, chief executive Ruslan Kogan and chief financial officer David Shafer, last year which cost $15.6m in equity based compensation in the 2021 accounts.

There was also more than $12m in provisional costs related to the third and fourth tranches of its purchase of New Zealand online business Mighty Ape.

Kogan.com said total revenue for 2021 rose 56.8 per cent to $780.74m. Gross sales rose 52.7 per cent to $1.179bn.

Mr Kogan celebrated the results, particularly the fact the business had burst through the $1bn sales mark for the first time, describing the online business as having huge potential.

“It’s very important to look at the size of the e-commerce opportunity in Australia … and to couple that with the fact we have continued to gain significant market share during that period,” Mr Kogan told The Australian.

“Yes we had some teething issues, there was a period we had to go from 14 distribution facilities to over 30 within the space of a couple of months, yes there were some inventory issues but if we had those decisions again we would make the exact same decision but we would have just dealt with it better.

“We are a better business today than we were one year ago.”

It said in 2021 its Kogan First loyalty program grew to more than 120,000 members with a medium term goal to hit 1 million members.

Mr Kogan said the online retailer had maintained a higher inventory level going into Christmas to safeguard from any shipping delays coming out of China as Covid-19 constrains and slows the global shipping supply chain.

Turning to outlook, Kogan.com said for the first 18 days of August gross sales were 24.5 per cent above July and gross profit was better by 25 per cent.