A slew of supply chain problems and piles of excess stock has prompted online retail giant Kogan to axe its earnings predictions for the current financial year, stunning investors and sending its shares plummeting.
In a trading update released to the market on Friday morning, the billion-dollar listed retailer told its shareholders it had encountered a number of issues, or operational challenges, over the past month which had put significant strain on the business.
Kogan.com CEO and founder Ruslan Kogan has warned of higher costs and excess inventory in his business.Credit:Louie Douvis
These include problems with the companys supply chains and logistics systems, higher-than-expected shipping costs, a glut of unneeded inventory, and price inflation on a number of key products.
As a result, Kogan warned its underlying performance would suffer in the near term as it worked through the problems, with the business earnings before interest, tax, depreciation and amortisation (EBITDA) now likely to fall between $58 million and $63 million for the financial year.
This is between $12 million and $9 million below consensus forecasts of $72 million in EBITDA, and falls short of even the most bearish forecast of $67 million. Shares in the company fell 11.5 per cent to $8.98 after market open, their lowest price in the last 12 months.
Investors have been cooling on Kogan in recent months, however, as the companys trading updates have shown the business has not been able to keep up with the blistering growth rates it reported throughout COVID-19. Shares in the company have more than halved in value since the start of the year.
At Kogans trading update in April, the company warned it was experiencing higher costs and issues due to an excess of inventory coupled with weaker consumer demand off the back of COVID. Analysts noted while many retailers were experiencing these issues, Kogans were exacerbated by the business aggressive expansion strategy.
Shares in the company have more than halved in value since the start of the year.Credit:Peter Braig
In its update on Friday, it appeared that strategy was continuing to hurt the business. Over the first half of the financial year, the company rapidly expanded its logistics footprint to 31 facilities, which led to a number of near-term supply chain inefficiencies and inventory planning issues.
