Kogan.com has recorded a net loss of $35.5 million for the year ended 30 June 2022. Revenue was down 8% to $718.5 million while gross sales inched up 0.1% to $1.18 billion.
Earnings before interest and tax was impacted by elevated operating costs from excess inventory following Covid related fluctuations in consumer demand. As a result, the business is in the process of driving efficiencies in operating costs and product ranges which has led to a return to adjusted EBITDA profitability in Q4 FY22.
Variable costs have reduced year-on-year by 27.6% driven by savings in warehousing costs following the continued unwinding of excess inventory. Also contributing to the reduction was the suspension of Kogan Delivery Services due to rising transportation and delivery partner costs.
The business has been performing extensive range reviews to offer the most in-demand products at the most affordable prices without investing in under-performing product categories.
Marketing costs increased to drive growth in Kogan First subscribers and promotional activity to reduce inventory levels. Marketing costs are expected to decrease as a proportion of gross sales in 1H FY23 as part of the company’s initiative to drive efficiencies in overall operating costs.
Kogan.com founder and CEO, Ruslan Kogan admitted that the company was wrong in its prediction that the acceleration of sales in the first year of Covid was not going to stop and consequently, the product range and volume of inventory was increased, as well as the logistics footprint.
“As the true volatility of the situation settled in, 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,” he told investors.
“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. The simple fact is more Australians and Kiwis will be online shoppers tomorrow than today. Millions of customers are discovering the benefits of shopping from the comfort of their homes and having a huge range of products delivered to their door at great prices.
“To continue to deliver this outstanding service, we need to increase the cost of access to Kogan First going forward. With the ongoing increase and evolution of subscriber benefits, as well as the impacts of inflation in delivery costs, the price of Kogan First will be increasing to $79 per year. We will continue to enhance the benefits to our Kogan First members with ongoing investment in the program.
“We’ve right sized our business, optimised for efficiency, and we’re pleased to see ecommerce adoption start to normalise and return to its steady and continued growth,” Kogan continued.