Kogan share price: where next following lumpy FY21 result?

‘We view KGN to be a key beneficiary of the ongoing lockdowns, similar to other ex-commerce players.’

The Kogan (ASX: KGN) share price fell sharply on Tuesday, after the e-commerce electronics retailer released its FY21 results to the market. After opening at $12.51 per share, the stock tumbled hard during the first few hours of trade, dropping 8.95% to $11.96 per share by 11:11 AM.

Despite that strong reaction from the market, Kogan’s headline results were decisively robust, though a number of sharp adjustments, as well as a cancelled dividend, were likely responsible for the skittish response from the market.

Results in focus

On the top-line, Kogan saw its sales pass the $1 billion mark for the first time, with the company reporting gross sales of $1.179 billion, implying a year-on-year increase of 52.7%.

That translated into strong revenue growth, with FY21 revenue coming in at $780.7 million, up 56.8% year-on-year. On the bottom-line, gross profits rose 61% to $203.7 million, while gross margins edged higher for the full-year, hitting 26.1%.

Overall, the pandemic has seen more and more people flock to online retailers such as Kogan. This is well reflected in Kogan's growing active customer base, which gained 46.9% in 2021 to reach 3.2 million by the close of the financial year. Kogan’s Mighty Ape customers stand at 764 thousand.

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This, however, is where things get somewhat messier. A number of heavy adjustments meant Kogan reported significantly disparate statutory earnings to its underlying earnings. Underlying earnings, for reference, are used by businesses to provide a better picture of what a company’s operational performance would ‘normally’ look like.

So on the underlying front, Kogan reported adjusted earnings (EBITDA) of $61.8 million (+24.5% YoY); adjusted profits (NPAT) of $42.9 million (+43.2% YoY) and adjusted earnings per share (EPS) of 41 cents per share (+27.2% YoY).

The statutory results diverged significantly, with Kogan reporting statutory EBITDA of $22.5 million, NPAT of $3.5 million and EPS of 3 cents per share. Those last two metrics collapsed 86.8% and 88.3%, respectively.

Management attributed that performance to a number of chunky one-offs, including excess inventory related costs, people costs related to the Mighty Ape acquisition, and 'logistics detention charges'. The Kogan Board also said it wouldn’t be declaring a Final Dividend as a means of conserving 'cash for business investment and growth purposes.'

Outlook

Looking forward and to cut through any misinterpretations, management said that 'the first 18 days of August 2021 have shown a strong acceleration above July 2021 performance, with Gross Sales 24.5% above July, and Gross Profit 25.0% above July.'

Elsewhere, analysts from RBC, who have a $10.00 price target on Kogan said: ‘We view KGN to be a key beneficiary of the ongoing lockdowns, similar to other ex-commerce players.’

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