Kogan shares dropped by a huge sixteen percent today as it’s strategy of keeping high inventory levels has crushed it’s profit. Over the past year, Kogan started increasing inventory levels to higher than normal to ensure that it was not stuck with insufficient stock to satisfy customers, something experienced in the first year of the pandemic. Kogan implement algorithms that determine how much stock they hold as well as influencing their pricing and levels of promotion.

In response to the big drop in profit, the Kogan board made the difficult decision to not pay a final dividend putting further pressure on their share price. The board has seen it as important to preserve their cash as profits for the financial year was a paper thin $3.5 million and 87 per cent drop from the previous year.

Ruslen Kogan, founder of Kogan, believes that despite the build up of stock, it may be beneficial soon as customers are stuck in lockdown and looking to shop online. Kogan expects customers to be shopping for Christmas presents early while they’re stuck at home which will hopefully benefit Kogan. This rush of shoppers will hopefully bring down the inventory levels of Kogan to manageable levels.

When lock downs are eased, sales for Kogan generally drops so it is critical that Kogan clears their inventory down before restrictions are eased.

Stores doing well online at the moment include Petal and Pup who has seen a rise during Covid restrictions. Save when you shop at Stax online by using a Stax coupon code.