After posting an update, the Kogan.com Ltd (ASX: KGN) share price is hotter than a Boxing Day special today.
While the consumer discretionary sector slides lower, shares in the online retailer are having a field day. As we approach midday, Kogan shares are swapping hands at $5.10 apiece, leaping a sizeable 16.7%.
Let's pop the locks on what investors are reacting to.
Platform approach paying off?
Kogan appears to have restored some confidence today as the company's latest business update shows further profit improvements during the first half of FY2024.
In the release, Kogan breaks out the gross sales for each business area. Kogan Marketplace, the company's largest contributor to gross sales, experienced a 9.1% decline compared to the previous first half. Meanwhile, the 'Exclusive Brands' segment suffered a steeper 25.1% reduction in gross sales, falling to $88.5 million.
However, the retailer's membership offering — Kogan FIRST — shined bright during the half. The segment contributed $33.9 million in gross sales, growing 133.5% from the prior corresponding period. Kogan recorded more than 466,000 subscribers on 31 December 2023, rising 15.3% in a year.
Despite reducing gross sales through the marketplace, the company attributes improving gross margins to the capital-light platform. Unlike producing and selling its own products, the marketplace allows Kogan to clip the ticket on products sold through the site by other businesses.
Notably, Kogan reported a 13.2 percentage point improvement in its gross margin, reaching 36%. In addition to platform-based sales, improved profit margins were realised on in-warehouse products as the company concludes excess inventory clearing.
Other important metrics to note in the first half include:
- Group active customers of 2.744 million
- Gross sales of $445.5 million, down 5.6% year on year
- Total gross profit of $89.5 million, increasing 42.1% year on year
- Adjusted EBITDA of $21.5 million versus a $4.4 million loss
- Adjusted EBIT of $14 million versus a $12.7 million loss
Kogan finished the half with $83.3 million in cash and no external debt.
What did management say?
Founder and CEO of Kogan.com, Ruslan Kogan, commented on the company's progress in the first half, stating:
The past six months have seen Kogan.com go from strength to strength, delivering on multiple projects for our Customers and ensuring we continue to help customers live their best lives by offering remarkable value.
The growth in our Kogan FIRST loyalty program and community demonstrates the value we are delivering every day to our customers. We now have over 466,000 Kogan FIRST Subscribers amongst our millions of customers, who get to enjoy the many new benefits we've introduced to the program.
Adding to the optimism, Ruslan described the business as having returned to a position of "stability and strength".
Kogan share price recap
The past 12 months have been a rocky path for Kogan and its shareholders. Before today, the share price was basically flat compared to a year ago. Inventory right-sizing and getting back on track have been a dominant focus.
Now, the Kogan share price is perched 54% above its 52-week low.
