Here’s a big nail in the now fading ASX tech boom – Kogan.com, one of the sector’s leaders, sharply downgraded June 30 earnings forecasts on Friday because of a slew of problems that have worsened as the year has gone on.
Tech favs like Appen, Nearmap, Nuis, EML, even Afterpay have been sold off – some savagely – after valuations became stretched and questions started emerging about business, strategy and just what was actually happening.
There have been worries about Kogan’s performance for most of the year so far – year to date the shares are down 46% and that loss will be added to by the big downgrade and earnings miss.
In a trading update released to the market on Friday morning, the billion-dollar retailer told its shareholders it had encountered a number of issues, or “operational challenges”, over the past month which have put significant strains on the business.
These woes include problems with the company’s supply chains and logistics systems, higher-than-expected shipping costs, a glut of unwanted inventory, and price inflation on a number of key products.
That saw Kogan warn its underlying performance would suffer in the near term as it worked through these problems. It now sees earnings before interest, tax, depreciation and amortisation (EBITDA) likely to fall between $58 million and $63 million for the June 30 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 market forecast of $67 million.
In a statement of unconscious irony, Kogan observed “The Company operates in a highly dynamic trading environment with trading conditions subject to continual change.”
That seems to be a warning that even these deeply negative estimates could worsen between now and the end of June balance date.
“The Company has learnt valuable lessons over the last few months, including many key strategies on how to better scale operations of a large fast-growing eCommerce company,” Friday’s statement concluded.
One of those ‘valuable lessons’ has to be the importance that you can be as big as you can be, but making a profit is paramount, as is not disappointing investors.
Unlike some of its previous monthly reports, the latest update didn’t mention sales growth or gross margin – telling signs of problems inside the company.
In fact the April update Kogan warned it was experiencing higher costs and issues due to an excess of inventory coupled with weaker consumer demand off the back of COVID.
Now it’s not only those, but too much stock, too many selling locations (31) and it looks like too many staff. So job cuts and other costs are going to rise for a while from now on.
