Kogan shares plunge on Mighty Ape profit warning, EBITDA miss
Make us a preferred source
Make us a preferred source on Google
The news: Kogan shares dived in early trading on the ASX after the online retailer warned that profit from its Mighty Ape business was "adversely impacted" by technical issues during last year's peak sales period.
The numbers: Shares were down 11.5% to $5.29 by 10:30am AEDT, having received a 5.5% bump on Tuesday following news that rival e-commerce retailer Catch would be wound down this year.
Kogan reported first-half gross profit of $106 million, up 18.3% compared to the previous corresponding period. Gross sales for the period climbed 10.3% to $492.5 million while revenue rose 9.9% to $272.7 million.
Citi analysts said Kogan's adjusted EBITDA increase of 17.5% to $25.3 million was a 7% miss to Visible Alpha consensus expectations. Citi has a 'sell' rating on the stock with a price target of $4.50.
The context: Kogan said growth during the first-half period accelerated during its peak retail sales period of November and December, incorporating Black Friday, Cyber Monday, Christmas and Boxing Day sales events.
However, the company noted that despite undertaking a digital transformation of its Mighty Ape business throughout 2024, implementation and technology challenges "temporarily adversely impacted" Mighty Ape sales and profitability during the peak period.
Those issues have now been "largely resolved", Kogan said, and the updated platform is expected to deliver "significant long-term benefits".
What they said: "The key negative for us is the decline in adjusted EBITDA during the Black Friday and Christmas sales period. Revenue grew but EBITDA fell," Citi analysts said.
"What may have happened was that the company drove a high level of traffic during this period to perhaps attract more FIRST sign-ups which may have resulted in a higher marketing bill.
"Additionally, commentary pointed to some difficulties around Mighty Ape marketplace launch where Kogan had invested in, driving margins further lower. There were no details around Kogan FIRST revenue and subscriber growth."
The source: ASX announcement
