Kogan share price tumbles 9% on first ASX loss

The company has revealed its FY22 results and says it is shifting focus to cost-cutting.

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Key points

  • The Kogan share price is falling after the retailer revealed its FY22 results this morning, but there are further signs of a turnaround
  • While revenue and profit in FY22 both fell, Kogan's adjusted EBITDA showed improvement in 4Q FY22
  • The momentum carried through to July with Kogan pointing out several growth drivers for the business in FY23

The Kogan.com Ltd (ASX: KGN) share price is under pressure as the retailer's focus shifts to cost-cutting after it unveiled a drop in full-year profit and revenue.

Shares in the online retailer opened at $3.52 and quickly fell to a low of $3.445 in early trading — a 9.35% drop. Meantime, the S&P/ASX All Ordinaries Index (ASX: XAO) has shed 0.5%.

This is the first loss reported by Kogan since it was listed on the ASX, according to The Australian.

Kogan.com is struggling to overcome the volatile trading environment as we emerge from COVID-19. But there are signs of hope.

Summary of Kogan's FY22 results

  • Revenue declined 8% to $718.5 million, reflecting a compound annual growth rate (CAGR) of 20.1% since FY20
  • Gross profit declined 9.3% to $184.4 million, reflecting a CAGR of 20.7% since FY20
  • Gross sales grew 0.1% to $1.18 billion (includes gross transaction values for Kogan Marketplace, Kogan mobile, and other new verticals)
  • A return to adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) profitability in 4Q FY22 with an adjusted net loss of $2.9 million for the full year
  • Group active customers of 3,972,000 at 30 June 2022, reflecting a CAGR of 20.9% over two years.

Other highlights

The group's Kogan Marketplace business saw gross sales increase 20.3% year over year (yoy) in FY22. This is partly driven by the 49.1% increase in the number of sellers on the platform, with a strong pipeline of local and overseas sellers ready to be onboarded.

Meanwhile, the Kogan First membership business grew by 372,000 subscribers to the end of FY22. This helped push up revenue by 73.4% yoy. The company aims to have one million subscribers.

However, its exclusive and third-party brands sales fell 17.6% and 35%, respectively. This division struggled with excess inventory and associated holding costs, although the situation has improved.

Given the uncertain trading environment, the company decided not to pay a final dividend. The last time Kogan paid a dividend was in May last year.

What Kogan.com said about its FY22 results

Kogan's founder and CEO said:

As the true volatility of the situation settled in — caused by stay at home orders and lockdown ambiguity — eCommerce did not continue to grow as anticipated. This led to us holding excess inventory, and an associated increase in variable costs and marketing costs to sell through the inventory.

As we've discussed at length through regular updates this past year, profitability in FY22 was impacted. When I started Kogan.com 16 years ago, I made a bet that online shopping would define the future of retail. My certainty of that is even stronger today than it's ever been.

Outlook

While Kogan.com didn't give guidance, it painted a positive outlook for FY23. It noted the ongoing expansion of Kogan Marketplace, enhancements to Kogan Verticals, further growth of its recently acquired Mighty Ape business, and growing Kogan First membership as reasons for shareholders to feel upbeat.

The company said it will focus on cost-cutting to help drive improved earnings this financial year. Its adjusted EBITDA in the last quarter of FY22 turned positive.

To that end, its July results will give shareholders further hope of a turnaround. Kogan.com noted that adjusted EBITDA for the month was $1.5 million and its operating costs have been cut 19.3% yoy.

Kogan share price snapshot

The Kogan share price has fallen by more than 70% over the past year while the All Ordinaries has lost 7%.

Kogan is also lagging behind other ASX retailers like JB Hi-Fi Limited (ASX: JBH) and Super Retail Group Ltd (ASX: SUL). These ASX retail shares lost 9% and 16%, respectively, over the past 12 months.

Motley Fool contributor Brendon Lau 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 and Super Retail Group Limited. The Motley Fool Australia has positions in and has recommended Kogan.com ltd and Super Retail Group Limited. 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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