Online retailer Kogan.com in Action; Registers Fresh 52-Week High

  • Jun 05, 2020 AEST
  • Team Kalkine
Online retailer Kogan.com in Action; Registers Fresh 52-Week High

Summary

  • The shift in consumer preferences towards online businesses has been advantageous for online retailers during the times of COVID-19.
  • com recorded over 100% growth in its online sales as well as profitability.
  • Other ASX-listed retailers like Myer Holdings and Accent Group have also seen notable growth in their online businesses.
  • With easing restrictions, companies look forward to opening physical stores with expectations of further growth in online business.

Some of the ASX-listed digitally enabled retailers have turned the corner by experiencing growth in online business during the highly uncertain times surrounded by COVID-19. Notwithstanding the headwinds from the looming worries of COVID-19, the KGN stock registered fresh 52-weeks high price of $13.00 during the day’s trade on 05 June 2020.

Leading Australian consumer brand known for price leadership through digital efficiency Kogan.Com Ltd. (ASX:KGN) has a portfolio of retail and services businesses with a focus on increasing the affordability, as well as the accessibility of in-demand products and services.

Despite the current highly dynamic trading environment, Kogan.com’s active customers grew to 2,074,000 during fourth quarter-to-date, i.e. April and May 2020 (4QTDFY20). This reflects a growth of 126,000 active customers in the month of May 2020.

During the period, Kogan.com has shown dramatic performance with numbers reflecting growth beyond 100%.

The gross sales for the Company grew staggeringly by more than 100% across 4QTDFY20 and the gross profit skyrocketed by more than 130% across 4QTDFY20. Moreover, adjusted EBITDA grew by more than 200% across 4QTDFY20 while financial year-to-date Adjusted EBITDA to the end of May 2020 expanded by over 50%.

Kogan.com’s retail and services business include the following:

Kogan.com’s cash balance stood at $58.6 million at 31 May 2020 with a debt facility drawn to $26.0 million.

Matt Blatt is one of Australia’s premier furniture and homewares retailers and a pioneer of the online furniture industry in Australia and was recently acquired by Kogan.com for a purchase price of $4.4 million financed from the Company’s cash reserves.

Post-acquisition, Kogan.com re-launched Matt Blatt as an online-only offering, which has been a family-run business, and an Australian furniture icon for almost four decades.

Stock Information

KGN stock settled at a price of $ 12.380, after gaining 8.596% on 05 June 2020 with a market capitalisation of $1.08 billion while registering fresh high price during the day. The surge in the stock since the month of March has given the stock a market capitalisation of more than $1 billion, which is much higher than other department store operators.

Did digitally enabled businesses carry the day during COVID-19?

COVID-19 has opened Pandora’s box, full of misery to the world, yet several digital products and service providers have weathered the storm and recorded significant growth in their businesses. Further, easing in the restrictions imposed to tackle the highly contagious COVID-19 have sweetened the deal for these digitally driven businesses by increasing prospects of growth.

The COVID-19 scenario has transformed shopping, production, supply, business relationships and most drastically, consumer behaviour In less than four months with the dislocation in the supply chain and business processes.

The restrictions during the lockdown compelled the businesses to opt for online or digital alternatives to connect with their customers and resume operations. Several retailers kept on trucking through the tough times posed by COVID-19 riding on their income stream from digital platforms.

Major Transformation in business service delivery includes a shift towards only take away services and online food ordering by restaurants and adoption of online-only-selling by various retailers who could not operate through brick and mortar stores.

Let us look at some other retail stocks that have witnessed thick and fast growth in their online businesses.

MYR’s Online Business Continues Strong Performance

Another Australia-based departmental store group, Myer Holdings Limited (ASX:MYR) also reported continuous strong performance in its online business during the times of restrictions on opening physical stores.

The business is getting back to its physical presence with reopening of 24 stores on a staged and trial basis, after considering government measures and conditions across the different states and territories. The Company had scheduled to reopen its remaining stores from 27 May 2020 and Karrinyup, was scheduled to reopen on 30 May 2020 after completing refurbishment job.

The Company has also introduced click and collect services at all stores across Australia, as they shall operate in a manner that protects the health and wellbeing of customers and team members

Material Boost in Online Business for AX1

Moreover, the promising results from the online business for Accent Group Limited (ASX:AX1) which is engaged in retail and distribution of footwear and apparel businesses, are encouraging for AX1. It expects its online sales to signify a much larger share of its total sales in the upcoming times as a result of the new wrinkle of a notable shift in consumer habits in Australia as well as New Zealand.

Moreover, the surging online business, along with the store network of AX1 adds to the fundamental competitive advantage to the Company.

Encouraging sales through online platforms has knocked the socks off for the Company. As a result of this, AX1 now plans to reassess the size, format and location of its store network to maintain an appropriate balance between digital and store sales. AX1 looks forward to stopping operations at the stores that are unsustainable or have uneconomic rental deals.

AX1 looks forward to maintaining its position as the largest multi-channel retailer in the market through its competitive advantage arising from the mix of superior digital capability and the fascinating stores.

Bottomline

The relief in restrictions by the government proved to be a port in the storm for the retailers in Australia as businesses are seen coming back to life gradually. Along with the shift in the preferences of the consumers towards online buying, an added advantage for businesses is the reopening of physical stores across Australia. However, some social distancing restrictions shall remain in place and are expected to significantly impact the revenue and profitability of the businesses. It shall be interesting to see how businesses cope when they are stuck in the eye of the storm.

 


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