Kogan.com (ASX:KGN) share price sinks 9% following half year results

The Kogan.com Ltd (ASX:KGN) share price is sinking despite delivering explosive sales and profit growth during the first half of FY 2021…

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Kogan share price

Source: Kogan presentation

The Kogan.com Ltd (ASX: KGN) share price is sinking lower on Friday morning.

At the time of writing, the ecommerce company’s shares are down 9% to $14.10.

Why is the Kogan share price sinking lower?

Investors have been selling Kogan shares on Friday following weakness in the tech sector and the release of its highly anticipated half year results.

For the six months ended 31 December, the company reported a 97.4% increase in gross sales to $638.2 million and an 88.6% jump in revenue to $414 million.

In respect to earnings, the company’s gross profit increased 126.2% to $112.9 million and its adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) grew 184.4% to $51.7 million.

And on the bottom line, adjusted net profit after tax rose 250.2% to $36.5 million and reported net profit after tax grew 164.2% to $23.6 million. The adjusted result excludes unrealised foreign exchange losses, equity-based compensation, and COVID impacts.

In light of its strong performance, the Kogan board declared a fully franked interim dividend of 16 cents per share. This is up 113.3% on last year’s interim dividend.

What were the drivers of its growth?

A key driver of the company’s growth was a 76.8% increase in Kogan.com active customers over the prior corresponding period to 3 million. This was supported by growth in Mighty Ape active customers to 719,000.

Also growing strongly was its Kogan First loyalty program. This Amazon Prime-style offering gives investors free shipping on their orders, among other benefits. However, management hasn’t provided details on membership numbers.

In respect to its segments, the Exclusive Brands and Kogan Marketplace segments were arguably the stars of the show. Exclusive Brands revenue grew 114.9% and Kogan Marketplace reported a 194.3% in gross sales.

Outlook

During the second half, the company plans to further expand its Exclusive Brands, enhance and develop Kogan Marketplace, complete the integration of Mighty Ape, and further grow its active customer base.

Consistent with prior years, Kogan will not be providing earnings guidance. Instead, it intends to provide regular business updates during the period.

Speaking of which, in January, Kogan’s unaudited management accounts show that gross sales grew more than 45%. This was driven by 111.6% growth in Kogan Marketplace and 54.6% growth in Exclusive Brands.

Positively, gross profit grew more than 102% and adjusted EBITDA grew more than 90%.

But as strong as this was, the Kogan share price hasn’t been able to withstand heavy selling in the tech sector today.

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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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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