Kogan’s post-tax profit has fallen by a staggering 86.8 per cent year-on-year following months of interruptions caused by the COVID-19 pandemic.
The online retailer posted A$3.5 million in profit for the year ended 30 June 2021 after being hit by an inventory disruption and acquisition costs from snapping up Mighty Ape.
The results follow its FY20 net profit after tax of $26.8 million, which was a year-on-year increase of 57.6 per cent and saw CEO Ruslan Kogan calling the period a "retail revolution".
However, in the 12 months since then, Kogan’s costs skyrocketed by 50 per cent to A$44.9 million due to soaring storage costs for its excess inventory.
The issue, according to Kogan's Australian Securities Exchange (ASX) report, stemmed from the COVID-19 pandemic skewing demand projections.
“Consumer demand did not increase at the rate forecast and various supply chain and logistics disruptions caused the company to end up with a high inventory position in [the second half of] FY21," the company noted.
“To address this, the company placed a strong focus on promotional activity in the second half to support the rebalancing of inventory."
The company told shareholders it expected this to balance out in the first half of FY22 as sales demand rebounds.
In addition, Kogan also faced detention charges of A$7.7 million for COVID-related warehousing and supply chain interruptions from late 2020 to April 2012, as well as a total of A$12.8 million for payments and costs related to its acquisition of Auckland-based online retailer Mighty Ape in December.
Meanwhile, the retailer’s other numbers were up, including its gross sales, which rose by 52 per cent to A$1.2 billion. According to CEO Ruslan Kogan, this was the first time the company's sales broke A$1 billion.
“It’s been a challenging year for so many people around the country," he said. “I’m proud that our team remained focused through difficult COVID-impacted operating conditions and found ways to support our customers when they needed our help most.
“While we recently celebrated our 15th birthday, we feel like we’re just getting started. Over the next year, we’ll be rolling out new and exciting projects to further support our loyal Kogan Community with Kogan First membership rewards, new and improved delivery solutions and further enhancements to the online shopping experience."
While net profit was down, gross profit was up 61 per cent to A$203.7 million and revenue for the overall business was also up 56.8 per cent to A$780.7 million.
Of the revenue, A$700.5 million came from Kogan.com while A$80.2 million was from the seven months in the reporting period that Kogan held Mighty Ape.
Although Kogan didn’t provide guidance for FY22, it did state that it is focusing its efforts on growing its Kogan First memberships and exclusive brands, as well as developing its Kogan Marketplace future and reaping the benefits of integrating Mighty Ape into its own business.
It also claimed its first 18 days of August 2021 have recorded strong growth in gross sales and gross profit, rising by 24.5 per cent and 25 per cent, respectively, when compared to July.