Kogan puts ‘brave face’ on declining sales: Shares at multi-year low

The unprofitable Kogan (ASX: KGN) has once again tried to hide its bleeding bottom line, allocating just a tiny one-liner that “Adjusted EBITDA was ($0.8) million” in today’s business update.

The company's stock was down -10.6% ($4.06) as the market opened, the lowest its been since the March 2020 covid selloff.

March quarter at a glance

• Active customers of 4.1m, up 3.6%

• Gross sales of $262.1m, down -3.8%

• Gross profit of $41m, down -11.2%

• Earnings loss of -$0.8m versus $7.0m a year ago

Turning a blind eye

Kogan business updates always take the easy way out.

The company loves to talk about the size and scale they’ve achieved, the growth in Kogan First loyalty program members, “best ever customer-service metrics” and the fact that compound annual growth rates since FY20, remains positive.

Management rarely talk about the company from a profitability standpoint. The best that chief executive Ruslan Kogan could conjure up today was: 

“Our current focus on recalibrating inventory levels and core operational costs is aimed at returning the Company to its historical margins and also to position the business for its next phase of growth.”

What next phase of growth?

eCommerce growth has moderated as covid tailwinds pass, inflation in Australia is at a 20-year high and Kogan hasn’t tasted profit since June 2021 - arguably the peak of lockdowns.

Abysmal track record

Kogan business updates are consistently good at eroding shareholder value.

Since 2021, business/financial updates have witnessed an average -8.1% one day decline in share price.

2021

• 29 Jan: Business update (-8.5%)

• 26 Feb: 1H21 results (-10.4%)

• 23 Apr: Business Update (-14.3%)

• 21 May: Business Update (-14.6%)

• 21 July: Business Update (-1.5%)

• 24 Aug: FY21 results (-15.5%)

• 20 Oct: Business Update (+6.7%)

• 25 Nov: Annual General Meeting (-4.3%)

2022

• 27 Jan: Business update (-12.3%)

• 25 Feb: 1H21 results (-6.2%)

The bottom line

Kogan has more than doubled its customer base since the beginning of the pandemic. Yet the business is struggling without covid and lockdown training wheels.

Its true that this challenge isn't isolated to just Kogan, as eCommerce peers like Redbubble (ASX: RBL) and Temple & Webster (ASX: TPW) have had valuations dwindle as well.

Until management can properly address margin issues and stop the bleeding, who knows how low Kogan can go.

Kogan 12-month price chart