Australian eCommerce conglomerate Kogan has recorded a 26% drop in gross profit to $136.6 million for FY23, driven by a rightsizing of inventory levels through the year.
Inventory levels were slashed by over 57% to $68.2 million, as at June 30, 2023, with Kogan noting it enters FY24 with inventory aligned to current demand. This is down from $159.9 million at June 30, 2022, with the height driven by volatile demand during the pandemic.
Kogan noted the inventory reduction significantly impacted gross margins, particularly in the first half of the year, for both exclusive and third-party brand sales.
With the business’ inventory now aligned, there was a significant improvement in profitability during the latter half of FY23, and this is expected to continue in FY24.
Meanwhile, gross sales and revenue declined by 28.4% and 31.9% to $844.8 million and $489.5 million respectively, with Kogan citing tough market conditions.
Over 57% of gross sales and 71% of gross profit was generated from platform-based sales on Kogan.com in FY23, making the first year that the two indexes’ contribution from platform-based sales outgrew product divisions.
“Importantly this has enabled us to deliver better quality earnings as we successfully transitioned into a higher margin, lower risk, platform and software based business while offering our customers increased competition and improved value,” founder and CEO Ruslan Kogan said.
“We have set ourselves up for success in FY24 and beyond, and in doing so, we have ensured we’re in the best position possible to deliver exceptional value products and services to millions of customers.”
Kogan Marketplace gross sales declined 28.5% year-on-year due to soft market trading conditions. However, the company noted overall seller-fees reduced by a lesser percentage due to improvements in seller management and experience, alongside reported rapid growth in New Zealand following its launch there in late June 2022.
The Kogan First loyalty program grew to over 401,000 subscribers as at June 30, 2023, with its revenue up 69.6% to $26.3 million. Kogan noted it continued to work on new benefits and features for the program, which are expected to see an acceleration in growth of Kogan First during FY24.
Group active customers were 2,945,000 comprising 2,190,000 for Kogan.com and 755,000 for Mighty Ape - Kogan’s New Zealand gaming marketplace.
The company’s net cash grew by $34.2 million during FY23 to $65.4 million as at 30 June 2023.
Kogan’s earnings before interest, tax, depreciation and amortisation (EBITDA) was minus $20.8 million, with the adjusted level at positive $6.8 million.
Adjusted net profit after tax was minus $7.7 million and statutory NPAT was minus $25.9 million.
Speaking on the company’s FY24 outlook, Kogan said the company has returned to sustained and increasing underlying profitability in the second half, giving confidence to the company.
“We expect the number of Kogan First Subscribers to accelerate following the expansion of the program, continued growth in our Verticals, a return to growth in Kogan Marketplace as well as our recently introduced Advertising Platform, the launch of a new Vertical in New Zealand and continued improvement in our Product Division’s profitability.
“These initiatives are expected to underpin continued growth in the business and support ongoing growth in shareholder value.”