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."
