Kogan share price lower despite stunning FY 2020 growth

The Kogan.com Ltd (ASX:KGN) share price is dropping lower on Monday despite delivering a very strong full year result for FY 2020…

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The Kogan.com Ltd (ASX: KGN) share price is dropping lower on Monday following the release of its full year results.

At the time of writing the ecommerce company’s shares are down 3% to $21.12.

How did Kogan perform in FY 2020?

For the 12 months ended 30 June 2020, Kogan reported gross sales of $768.9 million, up 39.3% on the prior corresponding period. From this, revenue came in at $497.9 million, up 13.5% year on year. A key driver of this growth was the shift to online shopping during the pandemic, which led to a 35.7% increase in its active customer base to 2,183,000.

Thanks to a 4.7 percentage point increase in the company’s gross margin to 25.4%, Kogan’s gross profit increased 39.6% to $126.5 million. This margin expansion was underpinned by the growth in commission-based or seller-fee-based revenue across new verticals and Kogan Marketplace.

Also growing strongly was its adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA). Despite a big investment in marketing, Kogan reported a 57.6% increase in adjusted EBITDA to $49.7 million. And on the bottom line, the company reported a 55.9% increase in net profit after tax to $26.8 million.

In light of this strong form, Kogan declared a fully franked final dividend of 13.5 cents per share. This was up 64.6% on the prior corresponding period and brings its full year dividend to 21 cents per share.

What were the drivers of Kogan’s growth?

Kogan successfully delivered growth across its business in FY 2020. The Kogan Marketplace was arguably the highlight, with its second half sales growing 71.2% on the first half.

This was supported by Exclusive Brands revenue and gross profit growth of 26.4% and 43.7%, respectively, for the year. Also performing strongly were the Kogan Internet and Insurance businesses. Kogan Internet reported a 90.9% increase in customer numbers and the Kogan Insurance business grew commission-based revenue by 36%.

The laggard in the group was its Third-Party Brands segment, which reported gross profit growth of 3.3% for the year.

Retail revolution.

Ruslan Kogan, Founder & CEO of Kogan.com, revealed that the company is experiencing some very positive trends. 

He said: “There is a retail revolution taking place as more and more shoppers learn about the benefits of eCommerce. We’re seeing record numbers of first time customers, who then go on to make repeat purchases at a 40% faster pace than previously.”

“For us this is a very exciting trend that shows that once customers learn about shopping online, they change their ongoing behaviour. Once someone discovers the benefits of online shopping, I struggle to see why they would ever go back to the old way of doing things. After almost 15 years of preparation, the revolution occurring in retail represents a significant opportunity for Kogan.com,” he added.


Kogan isn’t resting on its laurels and notes that “there is always more that we can do and new ways we can delight our customers.”

In light of this, it intends to further develop and enhance the Kogan Marketplace, grow its Active Customer base by investing in its platform, expand its Exclusive Brands and Third-Party Brands product divisions, and review ongoing acquisition opportunities.

No guidance will be given for the year ahead. Instead it plans to provide regular business updates during the year.

Speaking of which, in July Kogan achieved unaudited gross sales growth of over 110% and gross profit growth of over 160%. In addition, monthly adjusted EBITDA was more than $10 million in July, which compares very favourably to FY 2020’s entire adjusted EBITDA of $49.7 million.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. 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.

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