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E-commerce

Growth slows at Kogan after GST change

E-commerce marketplace Kogan saw strong trading over the holiday period, enjoying annual revenue growth of 10.6 per cent to $231.8 million.

However, the brand suffered an 8.6 per cent drop in net profit after tax to $7.4 million over the six months to December 31, 2018, due to the up-front costs of expanding the brand’s warehousing footprint, as well as investments into its marketing.

“We have continued our significant investment into our improved customer offering,” Kogan founder and chief executive Ruslan Kogan said.

“We have continued to invest in our brand to drive our growing portfolio of businesses and improve our value proposition.”

Kogan’s exclusive brands saw a 26.1 per cent increase in the first half of 2018, from $71.8 million to $87.9 million. This part of the business accounted for over half of gross profit in the first half of FY19, driven by category expansion, such as the retailer’s push into whitegoods.

The retailer’s global brands segment, however, suffered a 45.6 per cent decrease year on year, from $90.9 million to $46.6 million, due to the ongoing impact of changes to the way GST is collected.

The figure was also impacted by the continued effects of subdued demand for Apple products, with global brands now only making up 7.5 per cent of the company’s gross profit – down from 18.3 per cent in FY18.

The brand has previously talked about the difficulties of complying with the new GST law, which scrapped the $1000 GST-free threshold for online purchases from overseas retailers when it went into effect last July. Kogan said foreign-owned competitors are avoiding the GST and undercutting Australian firms.

In October 2018, the retailer said in a statement that it was unsure if the GST avoidance would be temporary, with analysts questioning what the effect on the brand’s global brands portfolio would be.

“While growth in the global brands division presents a challenge in the short term, we have built a resilient portfolio of businesses,” Ruslan Kogan previously said.

The brand noted that the second half of the year had “started well”, with revenue growing 13.1 per cent, and gross profit growing 19.9 per cent, but it did not provide EBITDA guidance for the remainder of FY19.

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