The Kogan.com Ltd (ASX: KGN) share price fell as much as 20% today before recovering some of those losses after revealing its first-half results.
Overall, the Kogan share price fell by 15% this week. Here’s why.
Kogan share price hit by earnings reversal
Key takeaways from the first half include:
- Revenue of $419.5 million, up just 1.3% year-on-year
- Adjusted EBITDA of $17.4 million, down 66.4% compared to FY21
- Dividend scrapped
- No full-year guidance
For a full report on the Kogan half-year results, check out Rask Media’s analysis here.
Kogan continues to grow, with now more than 4 million active customers across its Kogan.com and Mighty Ape websites.
It also achieved $61.7 million in operating cash flow, a big win given the self-inflicted inventory issues that plagued the business earlier in the year.
But that’s where the good news ends. If you remove the impact of the Mighty Ape acquisition, sales went backward.
Similarly, earnings declined, with the staff expenses more than doubling and marketing up another 32%.
The dividend has been scrapped in exchange for further investment in the business. And no guidance was provided.
Overall, it was a disappointing result, and the market reacted accordingly.
Investors fed up with inconsistent reporting
One issue that plagued the Kogan share price is its inconsistent reporting.
The business uses a lot of adjustments: adjusted EBITDA, adjusted NPAT, adjusted EPS, so on and so forth.
In fact, Kogan just one month ago announced an adjusted EBITDA of $21.7 million. Today that number was $17.4 million, with no direct explanation for the discrepancy.
Even the adjusted figures don’t stack up!
Furthermore, today’s results were released just 10 minutes before trading commenced.
It’s customary to give market participants time to digest the results. Hence companies release them at least an hour before the trading bell.
Finally, the business failed to give appropriate comparables. Instead, Kogan gave two-year CAGR comparisons.
Hi everyone, my name is Kogan $KGN and I'm addicted to compound average growth rates pic.twitter.com/FuF3qepctb
— Market Index (@MarketIndexAU) February 25, 2022
Marketing spend accelerates
As mentioned above, marketing expenses increased noticeably, impacting the Kogan share price this week.
Management is trying to push its Kogan First loyalty program, which is akin to Amazon Prime.
But the return on marketing has decreased. Gross profit per customer in the first six months has fallen from $32 to $27.
Put another way, marketing spend per new customer is $35, up from $28 a year ago.
Kogan isn’t alone in regards to increased marketing, with Temple & Webster Group Ltd (ASX: TPW) and Adore Beauty Group Ltd (ASX: ABY) also ramping up spending.
But it’s a concerning sign for the online retailer, and one the market will be tracking closely.
