Kogan share price crashes 12% to multi-year low amid Q3 sales decline

Kogan had a poor quarter…

| More on:
a man clasps his hand to his forehead as he looks down at his phone and grimaces with a pained expression on his face as he watches the Pilbara Minerals share price continue to fall

Image source: Getty Images

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

sdf

Key points

  • The Kogan share price has crashed to a multi-year low after the online retailer reported a decline in sales
  • Management also revealed a quarterly operating loss
  • Inventory levels remain elevated and management once again failed to predict weakening sales

The Kogan.com Ltd (ASX: KGN) share price has dropped to a new multi-year low on Friday following the release of a disappointing trading update.

In early trade, the struggling ecommerce company's shares are down 12% to $3.98.

Kogan share price sinks after disappointing third quarter

  • Kogan gross sales down 3.8% to $262.1 million
  • Gross profit down 11.2% to $41 million
  • Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) down 110.5% to a loss of $0.8 million
  • Active customers up a modest 28,000 over the three months to 4,099,000
  • Inventory levels broadly flat quarter on quarter at $193.9 million

What happened during the quarter?

For the three months ended 31 March, Kogan's performance continued to weaken with the company reporting a 3.8% decline in gross sales to $262.1 million.

This was driven by weakness across its core Kogan Exclusive Brands and Third-Party Brands categories. They reported sales declines of 18.8% and 21.8%, respectively.

This offset a positive performance from the Kogan Marketplace business, which reported a 19.8% increase in gross sales for the quarter. Though, it is unclear if the growth of this side of the business is due to it cannibalising sales from other categories.

Once again, management failed to predict this softening of sales and positioned its inventory for elevated growth in gross sales. However, it concedes that consumer demand did not meet these expectations. This left it with inventories of $193.9 million at the end of the period.

Outlook

No guidance has been provided by the company for the remainder of the year.

However, it has advised that over the coming year the company will be recalibrating its operating costs in line with current growth levels to support a return to the historical operating margins previously generated.

Founder and CEO, Ruslan Kogan, commented: "While market conditions are challenging at present, the foundations laid over the last 16 years are holding us in good stead. Our current focus on recalibrating inventory levels and core operational costs is aimed at returning the Company to its historical margins and also to position the business for its next phase of growth."

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. has positions in and has recommended Kogan.com ltd. The Motley Fool Australia has positions in 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 Scott Phillips.

More on Retail Shares

a woman wearing fashionable clothes and jewellery checks her phone with a satisfied smile on her face in a luxurous home setting.
Retail Shares

Why I think this ASX small-cap stock is a bargain at $7.85

I think this small company has big potential.

Read more »

A happy young couple celebrate a win by jumping high above their new sofa.
Retail Shares

Overinvested in Wesfarmers shares? Here are two alternative ASX retail stocks

These stocks could complement an investment in Wesfarmers.

Read more »

Happy shopper at a clothes shop.
Retail Shares

The share price of this All Ords stock has jumped higher again. Here's why

Here's why Myer's share price is outperforming.

Read more »

A smiling woman at a hardware shop selects paint colours from a wall display.
Retail Shares

Wesfarmers shares recently hit a 52-week high. Can they go higher?

This business continues to impress investors.

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
Retail Shares

Would Warren Buffett buy Lovisa shares right now?

Is this a sparkly opportunity?

Read more »

Happy shopper at a clothes shop.
Earnings Results

Why did Myer shares just rocket 9%?

Investors are piling into Myer shares on Friday. But why?

Read more »

a thoughtful shopper with shopping bags wearing sparkly gold dress and matching shoes reclines on a chair with hand to chin in thought.
Retail Shares

Can Lovisa's new high profile CEO take Lovisa shares to new heights?

Is Lovisa about to embark on a new era of growth?

Read more »

A woman sits on sofa pondering a question.
Retail Shares

After soaring 244% in 5 years, how much further upside does Macquarie tip for Nick Scali shares?

The broker's expectations remain steady.

Read more »