Kogan.com books improving sales and earnings
The online retailer is showing improving sales, earnings growth and membership, but analysts remain divided over its future profitability amid aggressive competition from the likes of Amazon and Temu.
Online marketplace Kogan.com says it has reported another quarter of stronger sales and earnings growth to position it to post an underlying profit for 2024, however analysts remain concerned that sliding traffic to its site and intense competition from players like Amazon, eBay and Temu could slash those gains.
Kogan.com on Monday issued its fourth quarter trading performance as well as pre-released its expected full-year results (although this did not include its forecast bottom line net profit) and also told investors that from the new financial year it would change the frequency and content of its business updates.
It said in a statement to the ASX that from the start of fiscal 2025 it would consolidate various individual components of gross sales and would no longer include regular updates on customer numbers and subscribers.
The July trading update revealed that fourth quarter gross sales fell 1.5 per cent to $181.4m, but this was against a 6.3 fall in third quarter sales and a 5.6 per cent sales slide for the first half.
Underlying earnings were also moving in the right direction, with Kogan.com reporting adjusted earnings of $5.7m for the final quarter was up on earnings of $2.8m for the fourth quarter of 2023.
The online retailer said for the full financial year its adjusted EBIT would be $25m, compared to a loss of $9.8m in 2023. Its flagship Kogan.com business would post earnings of $19.9m, a large turnaround from its pre-tax loss of $17m in 2023. The New Zealand arm of the business, Mighty Ape, would record an adjusted EBIT of $5.1m, down from $7.2m in 2023.
As part of the update, the final of its kind in this form, the retailer said its ‘Kogan First’ loyalty program hit more than 500,000 subscribers for the first time.
Kogan.com did not provide in its update what its projected net profit or loss would be for the year.
RBC Capital Markets analyst Wei-Weng Chen said Kogan.com’s preliminary fiscal 2024 profitability was ahead of its and consensus expectations, with fourth quarter earnings a “significant beat”.
“A key highlight of Kogan.com’s update today was a reacceleration in loyalty program subscribers. Members in the ‘Kogan First’ program increased by 25 per cent in fiscal 2024 to 502,000 at period end. Importantly, in our view, membership grew despite a 30 per cent price increase in April to $129 per year.”
Citi analyst James Wang said Kogan.com’s pre-announced fiscal 2024 results were inline with his expectations, although positive numbers around the company’s growth in paid-up subscribers to its loyalty program were countered by growing concerns over competition and a downturn in site traffic.
“Positively, Kogan First gross sales rebounded in the fourth quarter, growing by 50 per cent year-on-year and subscriber numbers took another leg up.
“However, we remain concerned over mounting competition, given activity indicators point to significant pressure. Activity indicators for July-to-date: Kogan.com web traffic growth down 26 per cent year-on-year, Kogan app usage down 36 per cent and Mighty Ape web traffic down 12 per cent.”
Citi has slapped a “sell” rating on the stock.
Kogan.com is set to release its full-year results on August 26.
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