In its latest trading update, Kogan disclosed that Mighty Ape, known for its wide array of products including electronic games and collectibles, is grappling with performance and inventory setbacks prompted by the upgrade initiated in February. This has culminated in a dramatic 63.7% decrease in adjusted earnings, leaving the company with only $2.5 million over the four-month span concluding in April.
Consequently, Kogan's stock experienced an 8.9% drop, settling at $4.12, and marking a reduction of 32.6% over the current year. Despite these challenges, the company remains optimistic, noting initial signs of a rebound, with gross sales gaining momentum as the Mighty Ape marketplace expands since its launch.
According to Kogan, improvements are on the horizon with Mighty Ape intending to align inventory levels appropriately in the coming months. This strategic adjustment is foreseen as a necessary step toward boosting sales efficiency and recovering operational stability.
Simultaneously, Kogan's broader business recorded a slight 0.7% decline in group revenue over the assessed four-month period. This decline is largely attributed to the underperformance at Mighty Ape, which overshadowed an 8.4% growth recorded by Kogan itself. Encouragingly, overall customer engagement has surged with active customer numbers climbing by 27.3% to a total of 3.4 million. Kogan’s core market saw a 38% increase, although Mighty Ape’s customer base dipped by 1.8%.
The acquisition of Mighty Ape in December 2020 for approximately $120 million was a strategic move by Kogan aimed at strengthening its market foothold across the Tasman. The current technological hurdles present a temporary setback to this expansion effort.
The unfolding situation with Mighty Ape highlights the challenges and opportunities that come with digital transformation in retail. For now, all eyes are on Kogan to see how it navigates these obstacles and capitalises on its growth prospects in a difficult market climate.
