Kogan cuts dividend as inventory woes send profits tumbling

Online marketplace giant Kogan will not pay a final dividend to shareholders after a number of unexpected costs and weaker performance over the second half of the financial year caused profits to fall 86 per cent.

The ASX-listed business told investors on Tuesday morning its net profit after tax had plummeted 86.8 per cent to $3.5 million for the year due to a raft of unexpected costs.

Kogan.com CEO and founder Ruslan Kogan. The company was forced to heavily discount excess inventory bought with the expectation COVID-elevated sales would continue through the second half.Credit:Louie Douvis

This included $25 million in higher storage and marketing costs as the business was forced to heavily discount excess inventory bought with the expectation COVID-elevated sales would continue through the second half, which they did not.

This also involved $7.7 million in costs incurred due to warehousing and supply chain disruptions. An additional $12 million was also spent acquiring more shares in New Zealand online retailer Mighty Ape.

Due to these unexpected expenses, Kogan declared it would not pay a final dividend to conserve cash and invest further in the business, leaving investors with just the 16 cent per share interim dividend declared in February.

Stripping out these costs, Kogan’s adjusted net profit rose 43.2 per cent to $42.9 million. Gross sales at the business cracked $1 billion for the first time, up 46.2 per cent to $1.18 billion for the year.

Chief executive Ruslan Kogan said while it had been a challenging year at the business, he believed the company had overcome its growing pains and was in a good spot for the year ahead.

“Over the past 18 months we have witnessed a massive swing towards the eCommerce retail revolution, one Kogan.com has been ready and waiting for, for well over a decade,” he said.

“We look forward to continuing our quest to delight our customers by making the most in-demand products and services more affordable and accessible.”

Trading for the start of fiscal 2022 has started out strong, with gross sales up 5.1 per cent through July and margins improving on the previous month, though costs remained high. August sales for the first 18 days of the month showed 24.5 per cent growth on July.

More to come

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Dominic Powell writes about the retail industry for the Sydney Morning Herald and The Age.

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