News

Kogan.com Limited has reported an inventory reduction in-warehouse of 39% since June 30, 2022, buoyed by unprecedented discounting that has impacted gross profit and gross margin.

Inventory has been reduced to $98.3 million (comprising $84.1 million in-warehouse and $14.2 million in transit) as at December 31, 2022, from $159.9 million (comprising $137.9 million in-warehouse, and $22.0 million in transit) as at June 30, 2022.

The reduction in inventory did result in reduced operating costs across both warehousing and marketing, and supported a growth in net cash (after loans and borrowing) to $74 million - after having funded the Mighty Ape Tranche 3 payment ($14.2 million), repaid loans and borrowings of $25 million and successfully acquired online homeware brand Brosa. 

Having now cleared through the bulk of this excess inventory, Kogan said it will continue optimising operating costs and streamlining the business to return to the levels of operating margins previously delivered prior to the COVID-19 pandemic. 

The Company expects gross margins to improve from January 2023, and to further optimise operating costs progressively through the second half of the financial year. 

Meanwhile, the half saw Kogan First subscribers grow to 404,512 by December 31, 2022 (47.6% growth year-on-year) and Kogan Mobile Australia reach the most ever Active Customers in its history (4.2% growth year-on-year). 

However, Kogan reported that the reflected subdued sales activity for the Company, whilst cycling a half in the prior year that was impacted by COVID-19 lockdown orders. 

Kogan.com founder and CEO Ruslan Kogan said the impacts of inflation and interest rates have begun to affect the lives of Australians and New Zealanders. 

“We’ve been growing Kogan.com for more than 16 years now, so we’ve been through many cycles, and we know that when customers are watching their costs carefully, eCommerce becomes even more important,” Kogan said.

“Since Kogan.com launched out of a garage in 2006, we’ve been obsessed with making the most in-demand products and services more affordable. We are proud to be making that possible for our millions of customers and the growing base of loyal Kogan First Subscribers. 

For the half, Kogan.com reported a gross sales amount of $471.1 million, down 32.5% year-on-year, said to be impacted by soft trading condition. It achieved a gross profit of $62.9 million.

Variable costs as a percentage of gross sales reduced to 7.6% in the first half of FY23 from 8.5% in the prior corresponding period.

Wesfarmers has laid off 100 staff in its e-commerce division Catch Group this week, with key departments impacted including marketing, product and technology, and finance.

“Like many e-commerce brands, Catch has made the difficult decision to reduce its workforce as the business adjusts to changes in online demand that has occurred following the Covid period,” a spokesperson told Inside Retail. “We want to be as efficient as possible to drive value for our customers.”

The company said it is looking to redeploy as many as possible of the impacted workers at other divisions of the group. 

“Treating people with respect is our number one priority and we are providing counselling and outplacement support to impacted team members.”

Inside Retail has learned from multiple sources staff lost their jobs this week, with the payrolls of some departments said to be cut by as much as 30 per cent. The redundancies began on Monday. Some roles in the Philippines where Catch has a sourcing and compliance arm, are also believed to be affected. 

Amid a media blackout ahead of Wesfarmers’ results announcement due on February 15, the company said it would not comment further on the redundancies, however, more details would be released during its results presentation. 

The job cuts come just three weeks after Catch’s chief product and technology officer Tomas Varsavsky left the company after two years. A week ago, Chris Burns, Catch’s head of transportation, finished up after a year at Catch to take up a new role as program lead – director supply chain at Grant Thornton. 

Catch Group was acquired by Wesfarmers in 2019 for $230 million. The business recorded a pre-tax tax loss of $44 million during the six months to December 31 2021, with gross transaction value increasing by just 1 per cent, despite the online shopping boom fuelled by the pandemic.

In July last year, the company appointed Brendan Sweeney as the new MD of operations. A former Cotton On executive, he took up the role last October. 

Amazon.com, the online retailer long feared to disrupt the grocery sector, believes it has fallen short.

The company has paused expansion of its Fresh supermarkets and cashier-less convenience stores until it finds the right recipe for success, Chief Executive Andy Jassy said on Thursday, in a rare appearance on the company’s quarterly results call.

What the company needs is a distinctive store format that’s doing well financially before embarking on a major expansion, a formula Amazon hopes to find this year, he said.

The remarks show how Amazon, which just a year ago said it would close its bookstores to focus on grocery, has yet to dominate brick-and-mortar retail since its closely watched acquisition of Whole Foods Market in 2017. Amazon has long viewed grocery as a key to unlock more consumer spending. remain fearsome competition. Despite Amazon’s large business from packaged food and other goods, it has yet to win significant market share in perishables, Jassy said.

Michael Pachter, an analyst with Wedbush Securities, said Amazon has itself to blame, having drawn consumers to online shopping decades ago.

“Retail is a tough business,” he said. “They are flushing money down a toilet pursuing Amazon Fresh stores” and thinking “they can brand a new concept and capture share from retailers who have been successful for decades.”

Jassy said the future of grocery was both online and offline, or omnichannel.

He said Whole Foods is growing and remains on top for premium, organic grocery, but Amazon’s mass-appeal offering needed work.

The company has a few dozen Amazon Fresh stores so far, Jassy said. It has also experimented with technology that bills shoppers for what they take from a store without having to pass by a cash register.

Amazon.com, the online retailer long feared to disrupt the grocery sector, believes it has fallen short.

The company has paused expansion of its Fresh supermarkets and cashier-less convenience stores until it finds the right recipe for success, Chief Executive Andy Jassy said on Thursday, in a rare appearance on the company’s quarterly results call.

What the company needs is a distinctive store format that’s doing well financially before embarking on a major expansion, a formula Amazon hopes to find this year, he said.

The remarks show how Amazon, which just a year ago said it would close its bookstores to focus on grocery, has yet to dominate brick-and-mortar retail since its closely watched acquisition of Whole Foods Market in 2017. Amazon has long viewed grocery as a key to unlock more consumer spending.

Rival grocers like Kroger Co and Walmart Inc remain fearsome competition. Despite Amazon’s large business from packaged food and other goods, it has yet to win significant market share in perishables, Jassy said.

Michael Pachter, an analyst with Wedbush Securities, said Amazon has itself to blame, having drawn consumers to online shopping decades ago.

“Retail is a tough business,” he said. “They are flushing money down a toilet pursuing Amazon Fresh stores” and thinking “they can brand a new concept and capture share from retailers who have been successful for decades.”

Jassy said the future of grocery was both online and offline, or omnichannel.

He said Whole Foods is growing and remains on top for premium, organic grocery, but Amazon’s mass-appeal offering needed work.

The company has a few dozen Amazon Fresh stores so far, Jassy said. It has also experimented with technology that bills shoppers for what they take from a store without having to pass by a cash register.

For the time being, the company has closed some grocery shops and impaired certain assets. It took a $720 million charge from such actions in the fourth quarter, its chief financial officer said.

Zoom Video Communications is eliminating 15 per cent of its workers as the service that became ubiquitous during the pandemic adapts to slower growth.

The company will cut about 1300 jobs as part of a restructuring, chief executive officer Eric Yuan said on Tuesday in a blog post. Yuan called himself “accountable” for the company’s issues and said he would reduce his salary and forgo his bonus.

“Our trajectory was forever changed during the pandemic,” Yuan said, adding that Zoom’s headcount tripled in two years. “We didn’t take as much time as we should have to thoroughly analyse our teams or assess if we were growing sustainably.”

The reductions are a bigger share of the workforce than cuts announced at enterprise software companies including Salesforce and Microsoft.

Zoom’s shares gained 9.9 per cent to close at $US84.66 in New York, the biggest single-day jump in three months. Despite Tuesday’s rise, the stock has plummeted 85 per cent from an all-time high in October 2020 and is now at pre-pandemic levels.

Like other companies that flourished during the pandemic only to stumble as lockdowns eased, Zoom has struggled to maintain its growth. Its market value soared in late 2020, topping $US150 billion ($216 billion), but with workers gradually returning to offices and “Zoom fatigue” entering the lexicon, the company’s value shrank. It is now worth about $US24 billion.

While people and businesses continue to rely on Zoom in post-pandemic life, the “uncertainty of the global economy” is affecting customers, Yuan said. Zoom is now trying to reverse slowing growth by expanding its tools for business.

Still, it has reported single-digit revenue increases for the last two quarters, and analysts project that sales have continued to decelerate in the current quarter. The cuts are likely a bid to preserve or improve profit margins in the face of slowing growth, wrote Bloomberg Intelligence analyst John Butler.

Competition from Microsoft’s Teams collaboration service has also become more of a concern for Zoom in recent quarters, according to industry analysts. In an interview with Bloomberg last month, President Greg Tomb acknowledged the competition, but said companies using Zoom rarely quit the platform. Tomb added the company’s biggest opportunity is getting existing customers using the rest of its portfolio, which includes tools such as the Zoom phone service.

Yuan, the founder of the California-based company, said his base salary, which was $US301,731 last year, will be cut 98 per cent, and he will give up a corporate bonus for the current fiscal year. His total compensation for fiscal year 2022 was $US1.1 million, according to a May 2022 regulatory filing. Others on the executive leadership will take 20 per cent base salary reductions.

In late January 2020 — before the COVID-19 outbreak was declared a national emergency in the US — Zoom’s headcount was about 2,500. It has since added about 6,000 people. The cuts announced Tuesday will reduce Zoom’s total workforce to early 2022 levels.

The company expects to incur $US50 million to $US68 million in costs, largely due to employee severance, with most reported in the current period ending in April, Zoom said in a regulatory filing.

Google parent Alphabet Inc said it will cut about 12,000 jobs, more than 6 per cent of its global workforce, becoming the latest tech giant to retrench after years of abundant growth and hiring.

The cuts will affect jobs globally and across the entire company, Chief Executive Officer Sundar Pichai told employees in an email on Friday, writing that he takes “full responsibility for the decisions that led us here”.

Shares of Alphabet gained 4.3 per cent in New York on Friday morning (US time). The stock has fallen about 30 per cent over the past 12 months.

With the layoffs, Google joins a host of other tech giants that have drastically scaled back operations amid a faltering global economy and soaring inflation. Meta Platforms Inc, Twitter Inc and Amazon.com Inc have all slashed their ranks. Thanks to a resilient search business, Google has been one of the longest tech holdouts. But the company is dealing with a slowdown in digital advertising and its cloud-computing division continues to trail Amazon and Microsoft Corp.

“These are important moments to sharpen our focus, reengineer our cost base, and direct our talent and capital to our highest priorities,” Pichai wrote in the email.

He said the company has a “substantial opportunity in front of us” with artificial intelligence, a key investment area where Google is facing a surge in recent competition.

Jeff Dean, the executive who leads Google’s artificial intelligence and research efforts, said that apart from a “modest number” of reductions across the research unit, the company had determined it was over-invested in its data platform for care teams, called Google for Clinicians. The robotics unit will also see consolidation across Alphabet and Google, he said.

Dean cited ongoing challenges with the current economic climate as the reason for the staffing reductions. “As a company and an organization, we have to get laser focused on the priority areas we want to invest in,” Dean said. “We must continue to focus on long-term, ambitious research and development that will help us create revolutionary products for billions of people.”

The industry-wide job cuts seem dramatic but they pale in comparison to the frenzied hiring that took place for most of the COVID-19 pandemic. In many cases, the layoffs will rewind the clock only about a year. Companies like Meta doubled in size during the pandemic, and Salesforce had added more than 30,000 people. Tech companies were competing with each other for talent.

“There was a mad grab for engineers,” over the last few years “and the fear they couldn’t get them,” said Ivan Feinseth, chief investment officer at Tigress Financial Partners LLC.

Pichai said Alphabet would be paying affected employees at least 16 weeks of severance and six months worth of health benefits in the US, with other regions receiving packages based on local laws and practices. Bonuses won’t be affected, he said.

In October, the company reported third-quarter earnings and revenue that missed analyst expectations. Profit declined 27 per cent to $US13.9 billion compared to the prior year. At the time, Pichai said Google would curb its expenses and Chief Financial Officer Ruth Porat said the number of new jobs would fall by more than half in the fourth quarter from the previous period.

Google’s reduction in headcount follows investor pressure to adopt a more aggressive strategy to curb spending. In November, TCI Fund Management Ltd. urged the internet search giant in an open letter to publicly set a target for profit margins, increase share buybacks and reduce losses in its portfolio of Other Bets, Alphabet’s moonshot division.

“The company has too many employees and the cost per employee is too high,” TCI Managing Director Chris Hohn said, noting that Alphabet’s headcount had swelled 20 per cent per year since 2017.

Google has made a series of cost-cutting moves in recent months, cancelling the next generation of its Pixelbook laptop and permanently shuttering Stadia, its cloud gaming service. Earlier in January, Verily, a biotech unit of Alphabet, said it was cutting 15 per cent of its staff.

Since 2017, the company has more than doubled its workforce, which reached 186,779 in the most recent quarter. Many of those hires were for Google’s cloud division, where the company is trying to build a second sales line to supplement its ads business.

But the cloud unit, which brought in $US6.9 billion last quarter, is still third in the market by most estimates.

In recent years, Google also added thousands of employees for its nascent hardware division with the acquisitions of HTC and Fitbit.

According to the human-resources consulting firm Challenger, Gray & Christmas Inc., the most job cuts in 2022 were in the tech sector — 97,171 for the year, up 649 per cent compared to the previous year.

Zip Co co-founder Peter Gray has argued the buy now, pay later (BNPL) company can be resilient if the United States goes into recession, even as the market continues to worry about how quickly the embattled fintech is burning through cash.

In a quarterly update on Tuesday, Zip said its key US business had made a profit by the company’s preferred measure in late 2022, amid strong revenue growth and a slide in its bad debts.

Analysts said the improvement in the US was welcome for the company’s hopes of moving into profitability. But they also highlighted a decline in Zip’s available cash and liquidity, which must support the company until it is profitable. Zip shares tumbled 16 per cent to 70c, reversing sharp gains from earlier in the week.

Amid market worries about the potential for a US recession, Gray argued the turnaround in its bad loans showed the flexibility of Zip’s model, after it cut back on higher-risk lending last year. Gray maintained Zip could be resilient to weaker economic conditions, including a potential recession, as it seeks to compete with credit cards as a payment method.

“I think arguably, the US is very close to that scenario [recession] now, and the results that we’re delivering prove the strength and resilience of the model. I think we’re really well-placed, I look forward to continued sustainable growth and profit over the next six to nine months, and we’ll demonstrate the power of Zip and the power of the model through an economic downturn,” Gray said.

“Zip should be recession-proof.”

Zip, the second-biggest local BNPL business behind Afterpay, faced intense in pressure in 2022 as its share price collapsed by up to 95 per cent from its peak, amid a wider plunge in valuations of loss-making technology businesses.

The company, which provides short-term consumer loans, responded by slashing costs, closing overseas businesses, tightening lending, and setting out a plan to move into profitability in the first half of 2024.

On Tuesday, Zip argued it was making progress, posting a 12 per cent annual rise in revenue to $188 million, and sharply lower bad debts in the US, a critical market.Zip said its preferred measure of cash earnings before tax, depreciation and amortisation (EBTDA) in the US was positive in November and December, a boomtime period for spending that includes Christmas and Black Friday. Zip said EBTDA in the US was on track to be “positive on a sustainable basis” from the end of this financial year.

Bad debts (unpaid instalments), which had blown out last year, contracted to 1.07 per cent of total transaction value in the US, from 2.36 per cent in the September quarter.

The fintech said it had available cash of $78.5 million, which it thought would be sufficient to support the company until it made positive EBTDA.

UBS analyst Tom Beadle, who has a “sell” on the stock, said Zip’s available cash and liquidity had fallen from $140.7 million in September (which included non-operating cash movements). Beadle said cash burn remained his “main focus,” and he added that the December quarter was seasonally strong for Zip.

RBC Capital Markets analyst Wei-Weng Chen said Zip’s trading update was better than expected, but also said Zip’s falling cash balance was a negative.

Zip’s share price has risen by about 25 per cent so far in 2023 amid speculation that interest rates are getting closer to peaking, but the stock is still about 75 per cent lower than it was this time last year.

Billion-dollar valued, Australian social media start-up Linktree lost $49.2 million last financial year after generating just $25 million in revenue.

But the Melbourne-based company that allows users, including major celebrities, to easily create websites linking their social media pages and earn money from their followers, also gained two influential strategic investors: Google and global talent agency IMG.

Linktree’s financial losses and the existence of its new investors were disclosed in a filing lodged with the corporate regulator, the Australian Securities and Investments Commission, in December.

Start-up technology companies, which typically generate losses as they chase growth and dominance of a particular market, have been under pressure due to rising interest rates and cautiousness among venture capital investors.

Linktree is one of only a handful of technology firms in the country valued at more than $1 billion. The company cut 17 per cent of its workforce in August along with an undisclosed number of contractors to save money.

The accounts show that Linktree’s revenue jumped 81 per cent from $13.8 million the year before to $25 million and its user base grew by 76 per cent to an undisclosed figure. But its losses also leapt up from about $3 million to $50 million as the company’s spending grew.

Two industry figures, speaking on condition of anonymity, said Linktree’s revenue growth was unimpressive relative to its spending. One said it was “well below benchmarks across almost any measure of efficiency.”

Google and IMG’s decision to invest a combined of $US10.5 million in Linktree in November, on the same terms as its last raise near the peak of the market, represents a major vote of confidence in the company. “These two strategic partners are incredibly enthusiastic and excited about Linktree, our growth and prospects,” said a Linktree spokesman, without naming the companies that are disclosed on its share register.

Last year Linktree launched a host of new products, such as new phone apps; features and partnerships, including with internet giants YouTube and Tiktok. It also refreshed its branding. In its directors report, Linktree said the changes variously gained it new users and improved how much it costs to acquire a user relative to their spending with the company, a key metric.

Linktree’s spokesman defended the company’s performance, saying its growth and focus on using its money efficiently gave it a clear path to profitability.

“Linktree is in a stage of hyper growth, focusing on expanding our offering in markets around the world, investing in expanding our team in the US, and marketing efforts to grow the brand,” the spokesman said. “Linktree has and continues to invest in its growth.”

In March last year, Linktree raised $US110 million, or about $150 million Australian near the peak of the market, from investors in a deal that valued the company at an enormous $1.7 billion.

In Linktree’s case, even after its big-spending 2022 financial year, the results show it still had about $110 million in cash and equivalents on hand.

The accounts show that Linktree spent about $80 million on operating last financial year, with $32 million on employee expenses, $13.7 million on contractors and ad spending of $14.8 million among the major costs. During that period, its workforce jumped from 92 to 283 people.

About $11.6 million that Linktree reported as “other income” was due to currency fluctuations, the results note.

Linktree, which was founded in 2016, has already done well for its founders. A separate document lodged with the regulator show that a trust named for the company’s co-founding brothers, Alex Zaccaria and Anthony Zaccaria, sold almost $14 million of shares in the company last year to some of its biggest investors. A third co-founder, Nick Humphreys, sold almost $7 million.

All the founders still retain much larger stakes in the company than they sold. The Zaccaria brothers’ trust company, for example, still has more than 660,000 shares in Linktree compared to the roughly 21,000 it sold last year.

Filings with the Australian Securities and Investments Commission are required for firms over a certain size and give an impression of a company’s performance in accordance with federal law, but do not have the level of detail that an investor would use and are not up-to-the-minute.

Some larger start-ups have complained that their financial accounts are publicly available. Sydney based tech firm SafetyCulture, previously criticised the publication of an article on its results, arguing it gave competitors in jurisdictions with weaker reporting laws an unfair advantage.

Google and IMG were contacted for comment.

Amazon.com’s layoffs will now stretch to more than 18,000 roles as part of a workforce reduction it previously disclosed, Chief Executive Andy Jassy said in a public staff note on Wednesday.

The layoff decisions, which Amazon will communicate starting January 18, will largely impact the company’s e-commerce and human-resources organizations, he said.

The cuts amount to 6 per cent of Amazon’s roughly 300,000-person corporate workforce and represent a swift turn for a retailer that recently doubled its base pay ceiling to compete more aggressively for talent.

Jassy said in the note that annual planning “has been more difficult given the uncertain economy and that we’ve hired rapidly over the last several years.”

Amazon has more than 1.5 million workers including warehouse staff, making it America’s second-largest private employer after Walmart it has braced for likely slower growth as soaring inflation encouraged businesses and consumers to cut back spending and its share price has halved in the past year.

It began letting staff go in November from its devices division, with a source telling Reuters at the time it was targeting 10,000 job cuts.

In number, its layoffs now surpass the 11,000 job cuts at Facebook-parent Meta Platforms Inc as well as reductions at other tech-industry peers.

Brosa, the upmarket online furniture brand, has been placed in voluntary administration, citing a decline in trade since Covid-19 restrictions enabled consumers to shop at physical stores again. 

Last February, Brosa’s co-founder and CEO Ivan Lim told Inside Retail the business grew more than 100 per cent last financial year, in line with other online furniture retailers. 

Fuelled both by existing customers increasing their order frequency and average order value during the pandemic, and new customers, who sought out online furniture retailers when stores were closed, the company seemed assured of success, its sales tripling. 

“There’s still so much growth, and we are really fortunate that we built a leading position as far as a digital-first experience goes for home and living,” Lim said.

But this week the dream was over, with KordaMentha Restructuring commencing a sale process for Brosa, and Richard Tucker and Michael Korda appointed as voluntary administrators.  

“The business faced challenges when sales declined after the Covid-19 restrictions were lifted,” said Tucker. 

“This caused short-term cashflow pressures after a period of phenomenal growth.”

KordaMentha is seeking expressions of interest in the business as a going concern. 

Tucker said Brosa had developed a strong customer base and technological capabilities “that would be an asset to many other furniture retailers”. 

“I expect that there will be strong interest in the Brosa business. The company was embarking on a campaign to reduce its inventory holdings and refocus itself as a make-to-order business.”

KordaMentha is planning a stock clearance from the company’s warehouses in Sydney and Melbourne. 

The online furniture and homeware retailer announced last week it had fallen into voluntary administration, today Kogan.com has revealed it has purchased the company.

Kogan.com has purchased the Brosa business out of administration. The company is reporting Brosa was purchased at $1.5 million, and additional logistics support for thousands of customers with undelivered orders. This purchase includes the assets of intellectual property, goodwill and stock, and excludes all leases and other liabilities. This means Brosa joins Dick Smith, Matt Blatt and Mighty Ape in the Kogan Group to expand the Kogan Group’s furniture offering. According to this morning’s media release, Brosa.com.au will eventually relaunch with expanded range and value under the new owners. The purchase was funded from Kogan’s cash reserves.

Last week, the company was placed into voluntary administration following a rough year in the wake of a pandemic sales boom that failed to maintain momentum. The administration was overseen by Richard Tucker and Michael Korda of KordaMentha. The administrators expected a strong interest in the company, and announced that around 30 investors had approached them, just days after the company was placed into voluntary administration.

“The acquisition of Brosa by Kogan will broaden the online furniture offering of the Kogan Group, providing unprecedented range and value to Brosa customers, while also expanding the range of furniture and homewares available to Kogan customers,” said Kogan.com COO and CFO David Shafer. “We are pleased to be able to offer a lifeline to Brosa customers, to be able to save the Brosa brand, and to relaunch Brosa.com.au very shortly. Following years of investment in brand-building and marketing, Brosa is a well known online furniture brand in Australia, and we are delighted to be able to bring the brand within the Kogan Group.”

KordaMentha has this morning released a statement that Kogan.com had emerged as the successful bidder. “Kogan.com is a white knight for the business and particularly customers who are awaiting delivery of orders where the stock was held by Brosa. Unfortunately, the Administrators were unable to fulfil these orders due to  challenges in the logistics network. Kogan.com is providing a great outcome for customers to get their product where possible and subject to commercial arrangements.”

Kogan.com intends to continue to operate www.brosa.com.au and offer delivery for customers who have already paid, where Brosa has the product in stock. In the announcement last week, the administrators claimed that this would likely be the case.

Mr Tucker said the priority for the Administrators now is to pay employees as soon as possible. He thanked the employees who had assisted the Administrators in extremely difficult circumstances. “The sale of Brosa is a fantastic outcome for the creditors of Brosa,” Mr Tucker said.