Kogan share price in spotlight after it releases new profit update

The sky-high Kogan.com Ltd (ASX: KGN) share price will be in the spotlight after management upgraded its recently upgraded guidance.

Kogan share price

Source: Kogan presentation

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The sky-high Kogan.com Ltd (ASX: KGN) share price will be in the spotlight after management upgraded its recently upgraded guidance.

Management indicated that the strong sales and earnings momentum it experienced in the last few months is accelerating into FY21.

More profit upgrades for FY21

Gross sales in July jumped more than 110%, while gross profit increased by 160% over the same time last year.

This compares with its previous update on July 21 where management said gross sales and profit improved by 95% and 115%, respectively, its June quarter.  

Kogan share price is the COVID-19 outperformer

Shares in the online retailer is one of the shooting stars from the COVID-19 crisis with the stock rallying nearly 150% since the start of the year.

Kogan isn't the only retailer to benefit from the pandemic lockdown, but it's the one that stands out. Other high-flying retailers like the JB Hi-Fi Limited (ASX: JBH) share price, Nick Scali Limited (ASX: NCK) share price and Wesfarmers Ltd (ASX: WES) share price "only" managed gains of around 11% to 25%.

In contrast, the S&P/ASX 200 Index (Index:^AXJO) fell close to 10% over the same period.

Conviction looms large

But Kogan's recent conviction for "misleading" customers continues to be a thorn in the side of an otherwise outstanding performance.

The Federal Court found that breached Australian Competition Law four days before the last profit update. Kogan is facing steep fines with the court yet to determine relief and penalties for the breach.

Kogan jacked up the prices of more than 600 products just before its tax time promotion, which offered a 10% discount off inflated prices to shoppers.

Kogan's contempt for customers?

What's more worrying is that management doesn't seem to have learnt from that lesson. You only need to read the quotes from the company's CEO and founder Ruslan Kogan in the July 21 update to see it's thick with irony.

"We operate in one of the most transparent and competitive industries. We've been increasing competition for Australian consumers 24/7 for 15years —all our prices and specifications are publicly advertised every second of the day," said Kogan.

"Every decision we make in the business assumes that our customers are smart shoppers who have done lots of research — in other words, educated, informed consumers."

Governance vs. financial performance

You know what they say about the word "assume" – it makes an ass out of "u" and "me".

It almost sounds like management is saying if you got misled and paid too much, it's really your fault for not being educated or informed.

Extremely poor choice of words, in my view, and as I said before, a company that treats customers in contempt isn't likely to treat shareholders much better.

Brendon Lau has no position in any of the stocks mentioned. Connect with me on Twitter @brenlau.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Retail Shares

Modern accountant woman in a light business suit in modern green office with documents and laptop.
Retail Shares

Why this top fund manager has been snapping up Lovisa shares

This leading fund manager believes the sell-off in Lovisa shares was an overreaction.

Read more »

Puk Pukster the Pug is displaying her new piece of jewellery with a sad face.
Share Fallers

This ASX 200 superstar is down 13% in 2 days. Time to pounce?

ASX 200 investors have sent this market darling spiralling lower. Is it a bargain or a falling knife?

Read more »

Two couples race each other in supermarket trollies, having a great time, smiling and laughing.
Retail Shares

Would I be crazy to buy Coles shares at $16?

The Coles share price has outperformed rival Woolworths over the past year.

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Retail Shares

3 reasons this broker thinks Woolworths shares are a cheap buy

Is this supermarket giant being undervalued by the market?

Read more »

A woman sits on sofa pondering a question.
Retail Shares

ASX retail shares mixed amid modest April sales growth

What does the latest sales data mean for ASX retail shares?

Read more »

Man on a laptop thinking.
Broker Notes

Why did Goldman Sachs just downgrade Wesfarmers shares?

The ASX 200 conglomerate has had a ripper run of share price growth. So why is Goldman Sachs downgrading it?

Read more »

Woman checking out new iPads.
Retail Shares

Dump 'em! Top broker says sell these 3 ASX retail shares

This comes amid high interest rates, weak retail sales, and persistently negative consumer sentiment.

Read more »

A woman looks at a tablet device while in the aisles of a hardware style store amid stacked boxes on shelves representing Bunnings and the Wesfarmers share price
Retail Shares

What is the price target for Wesfarmers shares?

Is there further success coming for this retail giant?

Read more »