Online retailer Kogan has seen gross sales fall 38.2% to $267.6 million during the start of FY23.
Gross profit has also dived 40.6% to $41.1 million for the first four months of the financial year.
Kogan CEO Ruslan Kogan said while the business has "suffered" in the past 18 months, it is on track to deliver "historical operating margins" during the second half of FY23.
"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. 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."
Adjusted EBITA for the business was down 104.4% to a loss of $0.5 million for the first four months of the financial year, while its net cash position is $20.1 million.
The online retailer offers goods across a range of product categories including fashion, electronics and general merchandise.
Kogan is hedging on a number of updates across its business to drive profitability, including enhancements through its verticals, a new advertising platform for H2 FY23, and plans to reduce operating costs.
The enhancements across verticals include the introduction of a purchase and balance transfer offer with Kogan Money Credit Cards, a relaunch of Kogan Insurance with its new partner QBE, and implementations across Kogan Mobile Australia. The latter includes a provision for eSims for all plans, a potential integration with Telstra’s rural towers, and the introduction of 5G.
Kogan said that while many of its verticals were impacted by the pandemic, the company is seeing a return to growth across them all. This includes Kogan Mobile Australia and New Zealand, Kogan Credit Cards and Kogan Energy.
Speaking on the year ahead, Chairman Greg Ridder said they expect to see significant changes in Kogan Marketplace, which also includes a new advertising platform
Kogan said it is expected to allow sellers to better reach and promote their offers to its customers.
“We also look forward to rolling out enhancements across our verticals, including Kogan Mobile, our largest vertical,” Ridder said.
Meanwhile, the company is also preparing to continue driving down operating costs following an excess of inventory earlier this year.
Kogan said that its drive to sell through the final balance of excess inventory has resulted in a positive cash position.
For background, the company saw consistent growth in FY22 buoyed by the pandemic, where sales doubled “almost overnight”. Kogan expected the growth to continue, with the company increasing its range and inventory volume, as well as its logistics footprint to match the expected level of growth.
However, in August this year, Kogan admitted that the company was wrong.
“As the true volatility of the situation settled in — caused by stay-at-home orders and lockdown ambiguity — eCommerce did not continue to grow as anticipated,” Kogan had said.
“This led to us holding excess inventory, and an associated increase in variable costs and marketing costs to sell through the inventory."
At the 2022 AGM this week, Kogan said the company has never shied away from transparency with the business.
“It’s no secret that during the COVID-19 pandemic, the efficiency of our Business suffered,” Kogan said. “We are now in a phase of consolidation, with the aim of returning to the levels of profitability and operating leverage that we previously delivered in the years between our IPO and the earlier stage of the pandemic.
In H2 FY22, the brand undertook a number of initiatives to reduce operating costs and streamline operations. This included reducing underperforming product categories to decrease warehouse costs, suspending Kogan Delivery Services due to rising transportation and partner delivery costs, and revising its 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.”
Finally, speaking on Q1 FY23 trading, Kogan said the results reflect a period of “subdued sales activity” in eCommerce, whilst also cycling strong results in the prior corresponding period.
“We currently have $20.1 million net cash, after having paid the third tranche of the Mighty Ape acquisition consideration,” Kogan said. “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. 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.”