The Kogan.com Ltd (ASX: KGN) share price is on watch after the e-commerce company saw the start of a recovery at the end of FY21.
Kogan’s recovery progress in FY21
Kogan has reported an acceleration of performance in June 2021. Compared to April and May 2021, June saw stronger gross sales, gross profit and adjusted EBITDA (EBITDA explained).
The company was able to reveal a number of financial numbers compared to FY21.
Gross sales increased by 52.5% to $1.18 billion. That included a $80.3 million contribution from Mighty Ape and $1.1 billion from Kogan.com (up 42.1%).
Total revenue rose by 56.8% to $780.7 million. That comprised $80.2 million from Mighty Ape and $700.5 million with Kogan.com (up 40.7%).
Kogan reported gross profit growth of 61% to $203.7 million. This included a $19.9 million contribution from Mighty Ape and $183.8 million from Kogan.com (up 45.3%).
Finally, Kogan revealed that its total adjusted EBITDA rose 23.1% to $61.1 million. This included a contribution of $6.9 million from Mighty Ape and Kogan.com adjusted EBITDA was $54.2 million (up 9.2%).
There were a few other metrics and numbers that the company told investors about. Active customers increased by 46% for Kogan.com to 3.2 million. Mighty Ape finished with 764,000.
Total inventory was $228.1 million, with $191.8 million in the warehouses and $36.3 million in transit. Management said that this reflected a significant unwinding of inventory received during the second half.
An improved situation
Kogan explained that it tries to forecast its operations to ensure the delivery of the right products to customers at the right time.
The turbulent nature of COVID-19 made it difficult to forecast and it thought that strong demand seen in the first half of FY21 would continue into the second half (and perhaps grow even more). So Kogan invested in inventory and its operations to be able to meet that growth.
But it bought too much inventory. So then it had to heavily focus on promotional activity to bring it to the right level. Combined with high warehousing costs, this hurt margins in the second half of FY21.
Kogan says it has brought down inventory levels a long way and is approaching the right level for the business.
It’s expecting improved efficiency moving forward.
What to make of this for the Kogan share price
I think Kogan is a business with quite a lot of future growth potential if it get the execution right on e-commerce growth. The last six months has seen a bit of a growing pains. But hopefully Kogan has gotten through that.
It seems like a very scalable business as it wins more customers and achieves more volume. The Mighty Ape acquisition also seems like a smart move with good margins.
At this lower Kogan share price, I’d be happy to buy some shares for the long-term with a recovery seemingly starting.
