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Date : 30/07/2022

Kogan.com (ASX: KGN) shares gained 50% after announcing FY22 Results

Kogan.com Ltd (ASX KGN) is an ASX-listed Australian retail and services group. The Australian consumer brand Kogan.com is known for its digital efficiency and low prices. The company aims to make high-demand goods and services more inexpensive and accessible.

Its portfolio of retail and services businesses includes Kogan Retail, Kogan Marketplace, Kogan Mobile, Kogan Internet, Kogan Insurance, Kogan Travel, Kogan Money, Kogan Cars, Kogan Energy, Dick Smith, Matt Blatt, and Mighty Ape.

The company on Thursday morning released FY22 results, and its shares are skyrocketing. Kogan reported record Gross Sales and a return to positive quarterly Adjusted EBITDA in 4QFY22. This was due to the successful ongoing recalibration of operating costs.

KGN: FY22 Key Financials

KGN shares are trading at $4.70 and have gained more than 50% in the intraday trading session on Thursday. The current market cap of the company is 502.56 Million AUD.

asx kgn

  1. Kogan’s gross sales in FY22 were $1.18 billion, while in FY21, it was $1.179 billion. Kogan announced gross sales grew by 0.1% above FY21 and a CAGR of more than 23% since FY20.
  2. Kogan’s gross profit was $184 million in FY22, while in FY21, its gross profit was comparatively higher, i.e., $203 million. The company’s gross profit declined by more than 9.4% in FY22. However, a CAGR of more than 20% was witnessed since FY20.
  3. The company’s adjusted EBITDA was $19.1 million for FY22.
  4. The number of Kogan.com Active Customers has increased to 3,972,000, with a CAGR of 21% during FY22.
  5. The company’s net cash position (total cash minus drawn debt) improved to $31.2 million as of 30 June 2022 from $12.8 million at the end of FY21.
  6. The total inventory was $161.1 million, with $139,2 million in warehouses and $21,9 million in transit. This represents a significant depletion of inventories at $227.9 million at the end of FY21.

Why did KGN Shares Skyrocket?

Investors were sceptical about Kogan’s performance. First, the company’s mismanagement of inventory, and secondly, the tough competition from Amazon give it a real hard time.

Due to this factor, KGN was the star of the short sellers, and if we conclude it, 8.2% of KGN shares were kept short.

The market was expecting a bad day for KGN, but contrary to that, KGN did an incredible and unexpected rise of 50% today.

Short sellers are trying their best to seize the opportunity and would be in a hurry to close their position today. This will add buying pressure and will create a short squeeze for today.

How can Kogan.com benefit from the High Inflation Environment?

The Australian Bureau of Statistics (ABS) revealed that the consumer price index (CPI) inflation has gained by more than 6.1% during the past 12 months to June 2022.

Compared to companies with physical stores, Kogan, an online company, can save a lot of cash on costs such as store networks, wages, electricity, and rent. The companies are facing a rise in employee and electricity costs, but online retailers like Kogan don’t have to pay the sales staff.

Due to this cash saving, online retailers can offer lower prices than retailers with physical stores and attract many customers. It could also afford to provide discounts to persuade its target audience to purchase from its online retail shops.

KGN: Founder and CEO’s Remarks

Ruslan Kogan, the CEO and founder of Kogan.com, believes that the times are changing. People don’t want to change their lifestyles in uncertain times but are willing to change how they purchase. They believe that Kogan.com fills a critical need in a world where exceptional value is more crucial than ever.

He further said that our company was designed specifically for this purpose. From day one, the Kogan.com team has prioritised productivity and responsiveness. We are grateful for the millions of Active Customers in the Group who have come to appreciate the value we provide. For the sixth year in a row, Kogan.com was chosen as the Australia Post ORIAS People’s Choice Retailer of the Year by the Australian people. This is a wonderful endorsement of the value we provide to our consumers.

Conclusion

We are still unsure if inflation has peaked yet. However, consumer sentiment in Australia is stronger than in its Western counterparts. The upcoming months will show investors what directions things are going. KGN could use its strengths to capitalise on being an online retailer and save costs. With an extra marketing push and better deals, they could see a significant change in the results of the first quarter of FY23.

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