Four things we learned from Kogan’s first financial results since going public
Wednesday, August 24, 2016/
Online retailer Kogan.com has beat its 2016 prospectus revenue forecasts and the acquisition of Dick Smith’s online assets has delivered an extra $6.5 million since May.
The retailer acquired Dick Smith’s intellectual property and online business in March 2016 for $2.6 million, with yesterday’s report for 2016 financial year to the ASX highlighting that the Dick Smith portion of the business helped Kogan beat prospectus revenue forecasts by 5%, coming it at $211.2 million for the year compared to the $201.1 million predicted.
As the fight for dominance in the global online retail space continues, here are four lessons we’ve learned from the retailer’s first results since going public.
1. The chase for users is on
As traditional bricks-and-mortar electronics retailers continue to face pressure, the drive to capture customers in the online space is heating up, with international and local providers going head-to-head. Kogan has highlighted both the smooth integration of Dick Smith into operations since the May launch, and a boost in overall users thanks to the acquisition. There were 2.3 million active subscribers in December 2015, and this increased to 3.7 million unique subscribers as of June 2016 (2.9 million from Kogan and an addition 1.2 million added from Dick Smith databases). Active customers – that is, people who have purchased something in the last 12 months – shot from 621,000 in June 2015 to 702,000 to June 2016.
The result also shows the opportunity Kogan.com has to court Dick Smith users across to other products: 88.2% of customers that were active users of Dick Smith online had actually never bought from Kogan before.
2. Forget laptops – the future is pest control
The Kogan business is about more than tech products and one look at the private label brands on offer shows up the broad scope of retail products Kogan.com is pursuing. There will be more proceeds added to “Private Label” operations thanks to funds from the June initial public offering, with a view to have these deliver benefits from the second quarter of the 2017 financial year. This means Kogan shoppers could have better access to product categories like pet supplies, baby and toddler wear, bathroom fittings, home hardware, men’s grooming, pest control and more.
3. Travel and mobile are tracking well
Sales out of both the Kogan Travel and Kogan Mobile imprints, launched in 2015, also exceeded forecast expectations. Chief executive Ruslan Kogan spoke of the management team’s ability to “rapidly deliver major complex projects”, such as the travel and holidays marketplace and mobile plan provider, highlighting this as a major strength of the company.
Kogan Travel’s online sales jumped from just under $1 million in the third quarter of the 2016 financial year to $1.4 million in the June quarter. Kogan mobile, launched partially in October 2015, has grown from 50,000 sales in its launch quarter to over 250,000 sales in the June 2016 quarter, with the company flagging that the setup has shown a “strong commercial relationship between Kogan and Vodafone”.
4. There’s IPO money to be spent
The retailer listed on the ASX in June and now has IPO capital to deploy into longer term growth initiatives.
Goals for the 2017 financial year include working on capturing Australia’s online retail market, which it says is un-penetrated compared to other developed economies. The 2017 Christmas period has been flagged as a starting point, where the outcomes of investment in new private label opportunities should be seen; the result acknowledges that free cashflow in 2016 prevented the expansion of private label brands, in the categories listed above, in the way the company would like.
Beyond that, it looks as though Kogan.com is going to be out there courting other Australian retailers, wanting to hold onto the “third party domestic product” growth the company saw in the 2016 financial year.
“Today, almost one in every six Australians subscribes to our sites,” said Ruslan Kogan in a call to new retailers to become product partners. “We will continue to see that influence grow as the Australian consumer becomes more discerning”.
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