The Kogan.com Ltd (ASX: KGN) share price has fallen around 25% after the e-commerce retailer announced its March quarterly update.
March 2024 quarter
It reported gross sales declined 6.2% to $178.3 million, after a “recalibration” of its revenue, and a focus on platform-based sales, which resulted in a “significant reduction in inventories year on year” as it aims to be a more capital-light business.
The gross profit increased 13.8% to $39 million, thanks to an improved gross profit margin which improved by 5.2 percentage points to 36.8%. There was a larger contribution of platform-based sales and improved profitability of in-warehouse inventory sales after the prior sell-through of excess inventory.
Platform-based sales contributed 61.6% of gross sales, with the advertising platform continuing to grow – it generated $0.8 million of revenue in the period.
Group active customers came to 2.66 million, while Kogan First subscribers rose 16% year on year to 472,000 at 31 March 2024. The Kogan FIRST membership cost has been increased from $99 to $129 on 8 April 2024.
The adjusted EBITDA generated was $9 million, up from $4.4 million in the FY23 third quarter. Kogan’s adjusted EBIT improved to $5.3 million, up from $0.2 million. Profit is a key thing for the Kogan share price.
At the end of the quarter, the business had cash of $34.1 million and no debt. Its inventory balance came to $71.1 million, a year on year reduction of 9.2%.
Management commentary
The Kogan founder and CEO Ruslan Kogan announced another development for the Kogan website to include travel. He said:
I’m excited to announce today that we continue to grow the benefits through the program, launching Kogan Travel hotel deals. As of today, Kogan Travel now offers the best value domestic and international hotel stays and packages with exclusive pricing for Kogan FIRST Subscribers. If you have some travel coming up, we encourage you to compare our prices and start saving.
Final thoughts on the Kogan share price
This seems like a big sell-off considering Kogan still made a profit. The cash position did reduce, so it’ll be interesting to see how that performs in final three months to June 2024.
Disappointingly, most of its main segments (Kogan Marketplace, exclusive brands, Mighty Ape and third-party brands) all saw a decline of sales. I’d want to see a return to growth in the coming months. It may be changing strategy, but I want to see sales growth after it stops cycling against the ‘old’ strategy.
It may well be oversold on a long-term view, but it does seem to regularly disappoint investors.
