It is true that stock market and share prices can be unpredictable sometimes, but some companies in Australia are experiencing a plunge in their profits and stock prices. Kogan is one of them and is facing a constant decline in its shares and stock prices. The market and investors are witnessing the Kogan share price constantly declining, despite the company being Australia’s biggest online retailer. The situation is discouraging for shareholders to buy more stocks or hold their current ones. A primary reason that the online retailer has for this ongoing situation is that they’re facing big losses in business for quite some time.
This article will analyze the scenario and shed some light on the reasons behind those losses. We suggest you read it completely to get some useful information about what’s happening to Kogan and its stocks.
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Let’s move on to discuss the reasons behind the plunging Kogan stocks.
What Made Kogan Share Price and Profits Fall?
Kogan reported huge losses and a decline in market capitalization since mid-October in 2020, when it was at its peak. The company made several efforts to get things back on track, but they were probably all in vain. The primary reasons behind all this are the disrupted supply-chain management amid Covid, extra warehouse and inventory management costs, strong competition from Amazon, and a decline in demand for e-commerce after the Covid vaccination roll-out. All these factors played a vital role in proving every Kogan share price forecast wrong. We have discussed these factors in detail below. Kindly read them to get a better understanding of the situation.
Disturbed Supply-Chain Management During Covid
The pandemic made it hard for Kogan to keep up with the demands of its customers as the supply-chain management was disrupted. The company had to incur huge losses as they were unable to meet customer expectations and fulfill orders on time. That led to a decline in demand for their products, which further resulted in the loss of revenue and profit.
Stock market experts predicted the situation to change in 2022, and their Kogan share price forecasts were again proved incorrect. Though the gross sales increased in 2022, they couldn’t convert it into profits and still faced losses. According to the company’s HY22 (Half Year 2022) results, their net loss was $11.9 million, which was a profit of $23.6 million. And company blames its supply-chain management for all this, which is true.
However, our analysis is that the Covid-19 also affected the customer demands as everyone went into quarantine, which increased the demand for certain products more than others. Kogan couldn’t read the situation timely and was late to import what customers demanded because of the closure of international borders.
Extra Warehouse and Inventory Management Costs
As Kogan made efforts to catch up with the market’s momentum and meet customer demands, they imported products in bulk and more than what the current situation demanded at that time. That led the company to invest in extra warehouse spaces and inventory management to keep up with the increased demand for their products during Covid. They paid a lot to rent out warehouses and inventory spaces to stock what they had bought and imported while the situation was changing, and a decline in Kogan:ASX share price became more evident and was on the cards. That put an extra burden on their finances, which led to a decline in profits.
Strong Competition from Amazon
Amazon is a tough competitor for Kogan, and it has been eating into its market share for some time. The pandemic only made things worse as people started buying more from Amazon because of the convenience and discounts they were offering.
Also, one of the most important reasons why Amazon gave a strong competition to the Australian e-commerce giant is that Amazon’s amazing supply-chain management was efficient, even during the Covid pandemic. It ensured to keep up with customer demands, resulting in a constant decline in the Kogan share price, sales, and profits, from which it is still struggling to battle properly.
A Decline in Demand for E-commerce After Covid Vaccination Roll-out
The covid pandemic has drastically and repeatedly changed the way the world, businesses, and markets operate. As it broke out, every customer shifted to online shopping because the physical stores were shut down, and no one could step out of their homes. That made the demand for e-commerce skyrocket within weeks.
However, as the vaccines rolled out, the restrictions were eased, and customers moved back to shopping in physical stores. That made it clear that there would be a decline in demand for e-commerce after the Covid vaccination roll-out as people started going out more and buying from brick-and-mortar stores. That again led to a decline in the Kogan share price because their sales and profit plunged, making it obvious.
However, experts suggest that it can be an opportunity for investors to buy cheap stocks as they believe Kogan has the potential to bounce back, making its shares go up.
That is all about Kogan, its stock prices, and why they fell. We hope we have provided you with useful information about the topic. Keep returning to The Australia Time to read more about business, technology, fashion, sports, health, and more. Happy reading!