What has prompted the rebound in the Kogan share price?

Posted: 20 October 2021 12:59 pm

The online retailer’s shares have lost more than half their value in the last 12 months.

Shares in online retailer Kogan.com (ASX: KGN) have not had a great run in recent months.

However, on Wednesday the stock was among the top traded shares on the ASX after surging more than 10% to $12.07 at the time of writing.

Why is the Kogan stock price bouncing?

The improvement in investor sentiment comes after Kogan.com outlined a solid trading update for the September quarter.

The company reported gross sales during the quarter rose 21.1% from a year ago to $330.5 million. They were 23.2% over the previous quarter. Although the sales growth is down from the near doubling rate a year ago, the double-digit gains are still considered significant on the much-improved base.

For FY21, Kogan had reported gross sales were up 46.2% to $1.18 billion for the year.

Gross profit for the 3 months to 30 September was down 1.7% from a year ago to $52.5 million, but was still up 31.6% on quarter. Active customers continued to grow strongly, up 30.7% on year to 3.35 million.

“While overcoming many challenges, the Kogan.com team has continued to deliver strong growth while investing in the future of the business and incubating new ways to deliver more value to our customers over the long term,” CEO and founder Ruslan Kogan said in the statement to the ASX.

Inventory fix

The encouraging performance apart, investors seem to be especially pleased that the company’s inventory problems – which have clouded growth prospects for quite some time – seem to be resolved.

The retailer had bulked up on inventory last year to back the high demand in the early months of the pandemic. But consumer sales slowed down later, leaving it with extra inventory that it was forced to discount.

Kogan had reported that its inventory at the end of July had doubled from a year ago to $215.4 million, leading to rising marketing and storage costs that hit its bottom line.

On Wednesday, the company said it has resolved the previous inventory pressures, and closed a number of inefficient overflow warehouses.

The reduction in inventory levels has led to the company significantly reducing its warehousing costs, delivering an average variable cost saving of $800,000 per month in the first quarter, Kogan said.

Investors will be hoping this is the trigger that reverses the poor run by the stock, which has lost more than half its value in the last year.

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