After a $36 million loss, Kogan.com chief executive and founder Ruslan Kogan said the company erred in responding to the booming e-commerce sales seen during the pandemic lockdowns.
Kogan on Tuesday told analysts that for over a decade, online shopping in Australia had been growing at a consistent and stable rate.
He said this allowed the Kogan.com to plan for growth in a “measured and precise way.”
But online shopping saw an explosion in popularity during the COVID-19 lockdowns, leading the online retailer to double in sales “almost overnight.”
This trend would continue for many months.
“Like many others, we bet that the trend was not going to stop, or slow,” Kogan said.
As a result, Kogan decided to increase its range and volume of inventory, as well as its logistics network to support the growth it expected.
“It turns out we were wrong,” Kogan admitted.
The online retailer was left holding excess inventory and had to deal with increased costs for the third-part warehouses it relies on across the business.
The company also had to invest more in marketing to sell through the inventory.
Kogan.com on Tuesday reported that its net profit had dropped to $35.5 million for the 12 months to June 30.
In comparison, Kogan.com had a $3.5 million net profit after tax in 2020/21 and a $26.8 million profit in 2019/20.
Gross sales were up 0.1 per cent to $1.18 billion year-on-year, with revenue falling 8.0 per cent down to $718.5 million.
Kogan.com announced it has axed final dividend for FY2021, having last paid out shareholders back in May 2021.
Ruslan Kogan and chief financial officer David Shafer told analysts that the company was now focusing on operational efficiency, such as by reducing the “long tail” of product ranges and focusing on offering in-demand products at lower prices.
The impact of the inflation has also led the company to hike the cost of its Kogan First subscription service that offers free delivery and special product offers to $79 a year or $8.99 a month.
The service currently has 372,000 members paying $59 a year or $5.99 a month, with an 85 per cent renewal rate.
Mighty Ape, the Kiwi online retailer that Kogan.com bought for $122 million in December 2020, delivered gross profit of $39.1 million on $163.4 million in revenue. It had adjusted earnings before tax (EBITDA) of $12.3 million.
Kogan.com did not provide earnings guidance, in keeping with its practice from prior years.
At 11.45am AEST on Wednesday, Kogan shares were down 6.6 per cent to a nearly four-week low of $3.55.
With news from AAP. Content has been edited for style and length.