Kogan (ASX:KGN) share price in limbo amid $11.9m first half loss

Kogan had a tough half

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Key points

  • Kogan had a tough half with revenue from its core business falling 17%
  • Higher costs and marketing spend weighed heavily on margins
  • Kogan's reported a loss after tax of $11.9 million

The Kogan.com Ltd (ASX: KGN) share price has been paused on Friday morning following the release of the ecommerce company's half year results.

After briefly rising 1% to $5.67, the Kogan share price has been paused pending the release of another announcement.

What this impending announcement relates to is unclear. Some shareholders may be hoping it's a takeover offer, though it could simply be an ASX Query relating to its results.

Speaking of which, Kogan had a tough first half. Here's what happened:

Kogan share price on watch after swinging to loss

  • Gross sales up 9.4% over the prior corresponding period to $698 million
  • Revenue up 1.3% to $419.5 million
  • com revenue down 17%
  • Adjusted EBITDA down 66% to $17.4 million
  • Adjusted net profit after tax down 87% to $4.8 million
  • Reported loss after tax of $11.9 million
  • Active customers up 9.4% year on year or 2.5% since August to 4,071,000
  • Total inventories reduced from $225.3 million to $196.8 million

What happened during the first half?

For the six months ended 31 December, Kogan reported a 9.4% increase in gross sales to $698 million but only a 1.3% lift in revenue to $419.5 million.

The latter reflects a full six-month contribution for the Mighty Ape business (acquired in December 2020) which offset a 17.3% decline in Kogan.com revenue to $325.7 million. Kogan.com's revenue decline was driven by an 11.2% decline in Exclusive Brands revenue and a 33.5% drop in Third-Party Brands revenue.

And while Kogan's active customers rose 9.4% to 4,071,000, its revenue per user metric is falling. This is despite its focus on growing the Kogan First loyalty program. That program grew 176% year on year to over 274,000 subscribers.

Growing Kogan First has also weighed heavily on its margins. Combined with high variable costs, the company's adjusted EBITDA was down 66% to $17.4 million and adjusted net profit after tax dropped 87% to $4.8 million. On a statutory basis, Kogan recorded a loss after tax of $11.9 million.

Unsurprisingly, Kogan has not declared an interim dividend.

Management commentary

Kogan's under fire Founder and CEO, Ruslan Kogan, remains upbeat despite the company's disappointing half.

He said: "Over the last six months we have invested heavily on expanding product choice, value and speed of delivery for our over four million Aussie and Kiwi shoppers to delight them each and every step of the way. I am extremely proud of our team's achievements, and even through the COVID situation — which has continued to bring operational disruption to all industries around the country and the world — our team has continued to focus on innovative ways to further enhance the Kogan.com and Mighty Ape customer experience."

"We have been delighting our loyal customers for over 15 years and we look forward to continuing our obsession in delighting our customers by making the most in demand products and services more affordable and accessible. This is a team that thinks very long term. What you're seeing right now is the building blocks for an even bigger and greater business, as we invest in building the best place for Aussie and Kiwi customers to get what they need. There's a reason more than 4 million customers are shopping at the Kogan Group, and we're working hard to help millions more," he added.

Outlook

No guidance has been given for the full year, but management has provided an update on its performance during January.

It revealed that in January its gross sales grew 11.9% over the prior corresponding period. No details were given on what this means for revenue or earnings.

Kogan intends to provide regular business updates during the year.

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