Why is the Kogan share price sliding?

Posted: 24 August 2021 1:19 pm
News
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The online retailer’s shares have lost more than half their value in the last 6 months.

Shares in online retailer Kogan.com (ASX: KGN) were among the most traded stocks in early trade on Tuesday, although not for the right reasons. At the time of writing, the stock had slid nearly 10% to $11.86.

Why is the Kogan stock price sinking?

Kogan.com on Tuesday announced full year results in which it outlined an 86.8% slide in net profit after tax to $3.5 million. That forced the retailer to declare it would not pay a final dividend to conserve cash and invest further in the business.

The company said its bottom line was hit by a raft of unexpected costs, including $25 million in higher storage and marketing costs, $7.7 million due to warehousing and supply chain disruptions and an additional $12 million to acquire more shares in New Zealand-based online retailer Mighty Ape.

Excluding these costs, adjusted net profit rose 43.2% to $42.9 million, while gross sales were up 46.2% to $1.18 billion for the year.

Chief executive Ruslan Kogan said while it had been a challenging year for the business, he believed the company had overcome its growing pains and was in a good spot for the year ahead.

Weak trading

Kogan.com has also not had a great start for the current financial year. Although the company reported that gross sales rose 5.1% in July, earnings before interest tax depreciation and amortisations (EBITDA) dropped 80% to $2.1 million due to higher operating costs.

Sales for the first 18 days of August were up 24.5% on the July numbers, although the company did not provide a comparison to figures for the same time last year. Kogan also said it had inventory of $215.4 million at the end of July, which is roughly double the stock in its warehouses this time last year.

The company’s FY earnings are a fraction of its 2020 earnings. They are also much lower than the revised guidance of $58 million to $63 million that it flagged in May, thanks to continuing operational issues.

The retailer had bulked up on inventory last year to back the high demand in the early months of the pandemic. Consumer sales have slowed since, leaving it with extra inventory that it has been forced to discount.

That is being reflected in its share price, with the Kogan stock losing 40% of its value in the last 12 months.

Considering investing in Kogan.com shares?

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Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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