Shares in online retailer Kogan jumped more than 10% on Thursday after founder Ruslan Kogan told the company’s annual meeting that its overstock situation was easing.
While he described the current online sales environment as “subdued” after the pandemic boom, the 18 months or so of bloated inventories are now under control.
That saw the shares leap 12% to a day’s high of $3.94 before settling back to close up 7.8% at $3.70.
Kogan told the meeting that “FY23 year-to-date trading covering July 2022 through October 2022 reflect a period of subdued sales activity in eCommerce, whilst also cycling strong results in the prior COVID-19 year.”
“Our drive to sell-through the final balance of excess inventory has resulted in a positive cash position.
“We currently have $20.1 million net cash, after having paid the third tranche of the Mighty Ape acquisition consideration. We are also seeing continued improvement in operating costs as inventory levels reduce further.
“Our businesses have returned to their regular operating rhythm, with continued growth being achieved in Kogan Marketplace, Mighty Ape, Kogan First, and key Verticals including Kogan Mobile Australia.
“Once the final sell through of inventory is completed, we plan to have the Kogan Group return to the historic growth trajectory and profitability that it has been able to deliver.
But he warned there won’t be a noticeable financial impact for the company (ie for the current December half year) until the June, 2023 half.
We look to the second half of FY23 with confidence as the Kogan Group returns to being an agile, inventory-light business with strong operating margins,” he told the meeting.
“In the second half of FY22 we undertook a number of initiatives to reduce operating costs and streamline operations, including: Reducing underperforming product categories in order to decrease warehousing costs; suspending Kogan Delivery Services due to rising transportation and partner delivery costs; and revising our proprietary marketing algorithm to improve ROI.
“We are continuing to implement further aspects of these initiatives in the first half of FY23 to achieve even more efficiencies, and we expect to return to our historical operating margins during the second half of FY23,” Kogan predicted.
