7 Nov, 2023
Skechers sets quarterly sales record as innovation drive pays off
By Celene Ignacio

Footwear brand Skechers saw record sales of US$2.02 billion in the third quarter of FY23, up 7.8 per cent year on year.

The company said sales grew in all its regions, including the Americas, which it attributed to the strength of its direct-to-consumer channel.

Net earnings surged 69.3 per cent to $145.4 million while gross margin rose to 52.9 per cent.

“Our record third-quarter sales were the result of our continued innovation and determination to deliver comfort, style and quality in every pair,” said Robert Greenberg, CEO.

During the quarter, Skechers launched a collaboration with Snoop Dogg and another with Harry Kane.

“Designing desirable footwear for fans of Snoop Dogg as well as our ambassador Martha Stewart demonstrates the diversity of style, offering and demographic of the Skechers brand and our customers,” said Greenberg.

“We believe our constant innovation to meet the needs of consumers from all walks of life—including professional athletes, and our impactful marketing will drive our success for years to come.”

3 Oct, 2023
Far from niche: Four out of five Australians are gamers
The Sydney Morning Herald

Australia’s average video game player is 35 years old, has been playing for 11 years and is equally likely to be male or female.

More than four in five Australians play video games, and tend to do so for more than an hour a day. And yet retrograde stereotypes and assumptions continue to pervade mainstream discussions of the medium and threaten to squander some of the opportunities it brings.

Research published in August, based on a survey of more than 1200 households, shows a wide and growing audience for games in Australia. Those who don’t game at all are by far in the minority. The proportion of the population that plays grew by 14 percentage points since 2021 to 81 per cent.

The research, commissioned by peak industry body the Interactive Games and Entertainment Association and conducted by Bond University, is the 10th of its kind since 2005. But IGEA chief executive Ron Curry said many people’s misconceptions about games, or even their failure to realise that they themselves play games, remained a problem for advocacy.

“It’s frustrating that year after year we produce this data, and yet we’re still trying to convince people that games are just not a niche product,” he said.

“Quite often we will sit down with policymakers or politicians who say they don’t play games, and we’ll just ask them, what’s on your phone? What do you do when you’re sitting on a plane? What is the first thing to do in the morning? You don’t have to be in a first-person shooter to be engaged with video games.”

And such thinking is not only a problem for funding, regulating and celebrating games. It has wider economic implications as well. While advertising is prominent on free-to-play smartphone-based games, advertisers have largely struggled to reach the gaming audience at large.

“You know, 21 per cent of game players are under the age of 18, so there’s a huge opportunity to advertise to the rest,” Curry said.

“But it needs to be nuanced, and it needs to fit in to the feel and the style of the game.”

The most conservative estimates of global video game revenue in 2022 put it at almost $300 billion, much more than the movie and music industries combined. IGEA figures have Australians specifically spending $4.21 billion; $2.65 billion related to console and PC games, $1.56 billion for mobile.

The most recent report also showed that 91 per cent of parents reported playing games with their children, 59 per cent of adults said they enjoyed socialising in games, one-third of players said they’d made a new friend inside a game, and only a quarter said they always play solo.

While the game-playing audience has grown across every demographic since 2021, there have been some exceptional leaps, for example in older Australians. The report shows that 74 per cent of 65 to 74-year-olds now play (up from 47 per cent), and 58 per cent of 75 to 84-year-olds (up from 31 per cent). The report authors put this down to the pandemic, which forced people to turn to screens and digital media for their communication and entertainment, and in some cases learn to use tablets and PCs for the first time.

Teenage girls also were shown to be playing more than teenage boys for the first time since the reports began. The two cohorts are fairly close in playing for about two hours a day on average. Curry said this was probably a result of the designs and marketing for games becoming both broader and more gender-neutral.

“I think it bodes well for the industry. If you’ve got 81 per cent of the population engaging in video games, they want to see themselves in a video game,” he said.

“They want a gender mix, they want different representations in the game, reflective of society.”

The report’s lead author, Professor Jeffrey Brand, said the overall split between male and female was not statistically significant given the sample size. The reported figures are 48 per cent female, 52 per cent male and a 10th of 1 per cent non-binary. The average player age of 35 is slightly higher than the last report, but the amount of experience the average player has is falling, as new players of all ages join in.

“Our mainstream discourse around who qualifies as a video game player still hasn’t evolved because we haven’t really acknowledged that games have moved on from the 1980s, 1990s console,” Brand said.

“The democratisation of games is very real, and when we stop and think about it we go ‘oh yeah, of course’. But I think we’re still buying into a dated stereotype about what video games are.”

Brand, who started his gaming journey with 1970s electronics like the Merlin and the Atari 2600, said some people who didn’t grow up with gaming can feel like there’s a fundamental difference between “real games” and the kind they themselves play in their downtime, when that isn’t necessarily the case.

He equated it to the difference between someone who considers themselves an avid novel reader, and someone who reads for pleasure less often or reads shorter form content.

“If you read short stories and nonfiction, or short fiction, you are still a reader. And you can be someone who enjoys cinema, even if you just watch a bit of it,” he said.

“Games are just like every other medium in that respect. There are a lot of casual games, there are a lot of in-depth games. Big businesses make games, but so do really small developers. There’s something for everyone. And that’s not different from television or books or films.”

3 Oct, 2023
Amazon gains ground on supermarket giants thanks to cash crunch
The Sydney Morning Herald

E-commerce giant Amazon is catching up to supermarket giants Coles and Woolworths in the online grocery market, as cash-strapped Australian households put the brakes on spending.

The latest quarterly consumer survey from investment bank UBS, which tracks the habits of more than 1000 Australian adults, reveals online spending intentions for the next 12 months have weakened and shoppers’ motivation to buy online is fading, particularly when a brand also has bricks-and-mortar stores.

The number of shoppers who said they planned to buy from the online stores of Kmart, Big W, JB Hi-Fi, Target and Myer fell compared with the previous quarter. Online spending intentions overall have also weakened, with the average consumer expecting their spending will fall over the next 12 months.

Despite this, e-commerce giant Amazon appears to have increased its influence in the online grocery market compared with pre-pandemic. The number of shoppers who said Amazon was their primary retailer for buying groceries online increased to 9.4 per cent from 8.9 per cent pre-COVID. The number of shoppers intending to buy from Amazon in the next year also increased compared with the second quarter of 2023.

The number of shoppers saying they primarily shop online at IGA also increased to 3.3 per cent from 2.4 per cent pre-pandemic. Wesfarmers’ troubled e-commerce platform Catch had gains too, with 4.1 per cent of consumers saying the brand was their primary e-commerce grocery retailer, compared with 3.6 per cent before COVID.

Coles and Woolworths continue to dominate the grocery market online and in-store, but the number of shoppers who say they primarily shop online with either of the two major supermarkets has decreased since before COVID-19.

44.7 per cent of consumers said they mainly shop online with Woolies, compared with 45.4 per cent before the pandemic, while at Coles this figure was 28.8 per cent, down from 30.8 per cent.

The numbers come as competition for budget groceries continues to intensify, and Amazon has said it’s seen good traction in its non-perishable grocery categories and for the company’s “subscribe and save” offer for repeat purchases of home and beauty items.

UBS retail analyst Shaun Cousins said in a note to clients on the survey that spending expectations were continuing to moderate thanks to cost pressures.

“Savings expectations have plateaued, with an increase led by high-income earners and stabilisation for middle-income earners, with low-income earners expecting to continue to draw on savings to fund spending,” he said.

Other recent spending data provides more evidence that retailers face a tougher fight for a smaller pool of shoppers’ dollars, with online-only brands facing a potentially tougher battle as households spend less overall.

National household spending data from the Australian Bureau of Statistics (ABS) released last week for July showed a 0.7 per cent fall compared with July last year, while discretionary spending dropped for the fourth straight month to land 3.3 per cent lower for the year.

Home goods and clothing spending had some of the biggest drops, down more than 7 per cent over the year.

ABS data also shows overall online retail turnover dropped by 7.4 per cent for July in seasonally adjusted terms.

The tough conditions have already forced some online-only brands to make tough decisions, such as fashion retailer The Iconic announcing at the end of last month   it was making 72 roles redundant. The business reported softer-than-expected sales last quarter.

Global ratings agency S&P has warned that the cautious consumer presents a challenge for companies’ margins in the near future.

“We expect that companies’ ability to pass through higher wages and other costs, thus preserving earnings margins, will diminish in the next 12 to 18 months,” analyst Richard Timbs said in a note to clients.

3 Oct, 2023
Apple braces for backlash after caving to demands on iPhone chargers
The Age
The Age

Every household has that box, under the stairs or in the garage, filled with a tangle of cables and a mishmash of charging plugs. This mess of copper and plastic is the final resting place for wires and old phones that have not been used for years.

Many cables lie abandoned for so long their original use has been forgotten. Yet the wires remain, just in case someone, one day, can remember what they were used for.

Those boxes could be about to get even more cluttered. On Wednesday morning AEST, Apple will reveal its new smartphone line-up, launching the iPhone 15 and iPhone 15 Pro. The phones will, undoubtedly, be hailed by Apple as faster, smarter and more powerful than its previous generation.

But one update to the new phones was beyond Apple’s control. The US tech company will be changing its “Lightning” charging wire and port – a technology unique to its devices – to another type of cable, known as “USB-C”.

While the tweak may seem innocuous, it has been the subject of furious debate and expensive lobbying by Apple for years, as the tech giant battled mandarins in Brussels who had launched a crusade against technology “e-waste”.

Last year, Brussels confirmed new rules that will force technology companies to adopt a common charging standard, picking USB-C, from 2024.

Officials at the time said, under the new rules, consumers would no longer need a different charger every time they purchase a new device, saying they would be able to use one single charger “for a whole range of small and medium-sized portable electronic devices”.

They argued chargers generated 11,000 tonnes of e-waste annually in the bloc, costing consumers €250 million ($418 million) each year. Since then, Apple has begrudgingly accepted that diktat. All the new phones in its iPhone 15 line-up are now expected to require a USB-C charger.

But experts say the move could irk some consumers by yet again making former charging hardware redundant, just as Apple’s revenues are falling.

Paolo Pescatore, an analyst at PP Foresight, says he expects to see “some backlash”, while Ben Wood, chief analyst at CCS Insight says: “The expected shift to USB-C could generate some friction for Apple customers who already have proprietary ‘Lightning’ cables and docks around their homes.”

While Apple’s iPhone 15 will feature a few new innovations, such as a zoomable periscope camera, the launch comes at a delicate time for Apple.

The $US2.7 trillion technology company has endured its longest period of revenue decline since 2016 and recently reported iPhone sales had fallen by just over 2 per cent in the three months to June.

Last week, more than $US200 billion was knocked from its market value, following reports China is banning the use of iPhones by government officials. China is a major driver of sales for Apple, while it is also crucial for its manufacturing.

Aside from the switch to new charging, Apple’s iPhone 15 range is likely to be a modest upgrade compared to previous years.

Although Apple will be keen to portray the switch as just one of its new iPhone innovations, last year it was fuming at the EU decision. “Obviously we’ll have to comply, we have no choice,” Greg Joswiak, Apple’s head of marketing, told Sky News last year. “The Europeans are the ones dictating the timing,” he said at the time.

In fact, Apple has spent years lobbying against the EU’s efforts.

Brussels first called for phone and laptop chargers to meet a common standard back in 2009. Back then, there were dozens of competing charging ports that were useless on rival brands. Apple signed up to an industry group that promises to work towards a single charging standard.

However, in 2012, it introduced its unique Lightning cable, which it is still using years later. Now, there are only three main charger types in Europe.

An 88-page report in 2019, commissioned by Apple itself, claimed consumers would face costs of €1.5 billion if they were forced to change chargers as a result of the reforms.

The report claimed: “The common charger would yield, at most, only limited environmental benefits.”

As of this year, there are roughly 1.5 billion iPhones in use worldwide, all of which use the company’s Lightning cables.

Apple is expected to make the swap from Lightning globally, not just in Europe.

Buyers who have relied on the same Lightning connector for many years may also find they have to buy a new wall power adapter.

To save on packaging, iPhones no longer come with a charging cable in the box. Its AirPod wireless headphones will also switch to the new cables.

The new cable to be included with the iPhone 15 is expected to include a USB-C port at both ends, which experts said could also add to any backlash from consumers. Most consumers are unlikely to own a wall adapter with such a port, as the vast majority of wall plugs take a larger USB-A connector.

Similar changes in the past have prompted outcry. When Apple removed the 3.5mm headphone jack from its phones, initial reviewers were divided, for example.

Still, plenty of fans are enthusiastic. The USB-C cables used by many Android rivals offer quicker data transfer speeds. They are also capable of faster charging, supporting up to 240W of power. Apple’s current Lightning cable is built for just 20W.

Apple has already started using USB-C on some of its larger devices, such as its MacBook range and iPads. Its phones also support wireless charging.

Dan Ives, an analyst at Wedbush Securities, says: “Apple had to bite the bullet on the USB-C, but it ultimately gives Apple some flexibility for more design changes down the road. Not ideal, but consumers will get used to it quickly.”

Wood, of CCS, adds: “In the long term, it’s likely to benefit them, with a universal charging system having some obvious upsides.”

While European officials may have finally forced Apple to bend the knee on USB-C, there could still be a further twist.

Earlier this year, reports emerged Apple may include tiny chips in its own-brand USB-C chargers that confirm they are authentic and grant them faster download speeds.

The Commission has already hit back. According to German newspaper Die Zeit, Thierry Breton, Europe’s business tsar, wrote to Apple warning: “Devices that do not meet the uniform charger requirements will not be allowed.”

It means the charging wars may have one final shock to come.

3 Oct, 2023
Redbubble director to resign - with another to follow

The board of Melbourne-born global marketplace Redbubble Limited is facing a reshuffle following its AGM later next month as it navigates a year of court battles and workforce reductions.

Non-executive director Jennifer (Jenny) Macdonald will resign from the Redbubble board of directors following the group’s AGM on October 24, 2023. Another long-standing director is also expected to step down during FY24, as part of a board renewal process.

Macdonald has been on the board of Redbubble Limited since February 2018 and became chair of its audit, risk and compliance committee in October 2019.

“It has been a pleasure to serve on the Redbubble Limited board for the past five years,” McDonald said. “After reviewing my workload in light of new commitments, I have made the difficult decision to step down.

“I remain confident in the long-term potential of the group and will continue to offer my support from the sidelines.”

The board will conduct a formal search process to identify a suitable candidate to replace Macdonald. 

Chair of Redbubble Limited Anne Ward thanked McDonald for her service on behalf of the board.

“Over the past five years, the group, and its operating environment, have evolved significantly and Jenny has played an important role in helping us navigate this challenging period,” Ward said.

“The Board has started a formal process to identify suitable candidates to replace Jenny, and to accommodate further changes to the board, through an orderly process of renewal, without disrupting the recent progress that has been made to return the group to profitability."

The news comes after a bumpy year for Redbubble. In July, two long-running court battles for its US-based subsidiary, Redbubble Inc, came to a head. Redbubble Inc received two “favourable decisions” regarding copyright infringement in ongoing litigation tabled by US fashion retailer Brandy Melville and gaming company Atari Interactive.

In the Atari Interactive case, the gaming company sued Redbubble for contributory and direct trademark infringement, according to court documents released in July. On appeal, Atari challenged the district court’s summary judgment rulings and certain trial rulings.

The United States Court of Appeals for the Ninth Circuit, which oversaw the case, upheld the district court’s judgment in Redbubble’s favour.

In the Brandy Melville case, the Ninth Circuit agreed that Redbubble cannot be held contributorily liable when third parties misuse Redbubble’s service to infringe without the company's knowledge, and remanded the case to the district court to decide any remaining issues under that legal standard.

Meanwhile, the Redbubble group reduced its workforce by 23% in May 2023 in a bid to further cut costs. 

The online marketplace noted in May that it is aiming to reduce its operating expenditure by a further $13 million to $15 million on an annualised basis. The majority of the cost savings will be achieved by reducing the group's workforce by 75 roles.

Redbubble Group CEO Martin Hosking said the business has been restructured as part of the process.

"Since being appointed CEO, my primary focus has been returning the group to profitability as soon as possible. It has become clear that to achieve this, we need to further reduce our cost base. As a result, we have made the difficult decision to remove a number of roles from the group.

“As part of this process, we have restructured our business to more clearly define the group function and two operating companies, Redbubble and TeePublic."

Amid these shifts, Redbubble recorded a gross profit after paid acquisition (GPAPA) margin of 28.5% in the fourth quarter of FY23, up 550 basis points above prior corresponding period (PCP).

This is also 350 basis points above the historical average, according to the company.

Despite the improved performance in the fourth quarter, the FY23 GPAPA margin was down 120 basis points on the PCP to 20.9%, due to softer performance in the first half.

Looking ahead, the group claimed trading conditions will remain soft in its key markets, particularly the US, in the near term. Redbubble also operates in Europe and Australia.

Due to this, the company noted it will focus on cost of goods sold (COGS), promotions and paid marketing activities to maximise GPAPA.

The group expects its FY24 GPAPA margin to be between 23% and 26%.

The group also expects to see the full benefit of cost-saving measures implemented in FY23 in FY24, with operating expenditure predicted to be between $92 million and $100 million in FY24.

“As we look ahead, we remain cautious and expect market conditions to remain challenging,” Hosking said. “As a result, we are focused on what we can control - ensuring we are operating as efficiently as possible and maintaining strong cost discipline.

“We continue to believe in the potential of our two marketplaces, Redbubble and TeePublic, and are confident that both businesses can deliver sustainable growth.”

1 Sep, 2023
How Nvidia became the world’s most important company overnight
The Age
The Age

The three mid-ranking Silicon Valley engineers behind Nvidia had just $US40,000 ($62,350) between them when they started the company three decades ago, fuelled by a belief that 3D graphics would change the video game industry.

Now, it costs the same amount to buy just one of Nvidia’s microprocessors, and it can’t make enough of them.

The artificial intelligence (AI) boom has made Nvidia perhaps the world’s most important tech company and secured it a value of more than $US1.2 trillion.

Its latest boost came on Wednesday night, when the business revealed quarterly profits had climbed by a staggering 843 per cent in a year alone, up from $US656 million to $US6.2 billion.

Sales in its data centre business, which reflects demand for its top AI chips, climbed by 141 per cent in just three months, surpassing even Wall Street’s lofty expectations.

The best news for investors was that the company predicted the party would continue, forecasting another leap in sales in the third quarter of this year.

Shares, already at a record high, rose by 6.5 per cent as markets opened on Thursday and to some, the only question is how high can it can go.

The latest rally cemented Nvidia’s spot as a world-leading tech giant.

Big dreams

Jensen Huang, Nvidia’s chief executive and principal founder, always had big ambitions.

The company decided to focus on video games in the 1990s when Huang observed demand for increasingly advanced computer graphics and predicted a need for drastically more powerful chips as games moved towards more immersive and 3D worlds.

When Nvidia’s share price hit $US100, Huang had the company’s logo tattooed on his arm.

But even he would have failed to see the AI rush that boosted his personal fortune to $US42 billion.

Nvidia’s work on computer graphics in the 1990s led it to invent the graphics processing unit (GPU), a type of microchip dedicated to computer gaming and video tasks. GPUs, however, also excel at other types of number crunching.

Nvidia thrived during the cryptocurrency booms of 2017 and 2021, as its processors proved to be highly proficient at the high-powered mathematics needed to mint new Bitcoins.

It also rode a brief flurry of excitement around the “metaverse”, the virtual reality championed by Mark Zuckerberg.

However, the AI boom has eclipsed all that.

Large language models such as ChatGPT and Google Bard require thousands of GPUs, both for their initial “training” and for the subsequent interactions known as inferences.

Almost every company and government is falling over themselves to invest in AI.

Amazon, Microsoft and Google, which operate the giant cloud computing data centres on which AI models generally run, are placing orders worth billions of dollars with Nvidia.

To a degree, Huang is fortunate his video game chips are so well suited to AI, but his allies reject suggestions he simply stumbled upon a pot of gold.

“He was one of the early people to think about it (AI) and study it,” says a former Nvidia executive.

“Jensen had big ears, he was listening to what was happening, he was experimenting and investing in how they could tweak these GPUs to be better at this stuff.

“He took a decision to bet significantly on AI in around 2018.”

Today, the company has competition from chip making giants AMD and Intel but enjoys a huge head start. So much so that Nvidia is now practically synonymous with AI itself.

The company’s results on Wednesday were seen as definitive because they suggested its leap in sales was not just a one-off but part of a sustained surge in investment.

Huang said that there was now a “tipping point” at which companies were diverting more of their investment into AI technology. “A new computing era has begun,” he said. “Our demand is tremendous”.

Still, not everyone is buying what Huang is selling. There are concerns that the public’s interest in ChatGPT is beginning to wane. Analysis of web traffic data shows visitors to OpenAI’s ChatGPT site fell by 10 per cent in June.

While the ChatGPT boom has relied on companies buying up swathes of Nvidia chips, companies such as Meta are now championing AI algorithms that need less computing power.

Meanwhile, some investors have decided that Nvidia’s skyrocketing share price makes it unpalatable.

One investment house, AXS Investments, has even launched a fund dedicated to taking short positions against Nvidia - betting its stock will fall. Investors have so far put $US100m into the fund.

High demand for the company’s processors in China could also come unstuck due to US sanctions. The White House has already blocked the sale of some of its most powerful AI chips to Beijing and could go further.

Greg Bassuk, chief executive of AXS Investments, says Nvidia’s valuation is “suspect for some investors concerned about geopolitical impacts on the company’s growth prospects”.

He adds investors are now looking at whether the company’s “runaway growth in AI can persist at this pace”.

However, so far this year short-sellers are nursing heavy losses by betting Nvidia’s share price will fall and are down over $US11 billion, according to analysts S3 Partners.

“Nvidia’s hardware has become indispensable to the AI-driven economy,” said Jacob Bourne, an analyst at Insider Intelligence. “Its results show how crucial the tech giant has been to the current economic growth narrative resting on the outlook that AI will elevate productivity and unlock trillions in economic value.”

If Nvidia can secure a fraction of those trillions, it might be unstoppable.

1 Sep, 2023
Booktopia reports full-year loss of $29 million
Inside Retail

Pureplay retailer Booktopia says a challenging economic climate coupled with the impacts of its transition to its new customer fulfilment centre (CFC) resulted in a loss of $29 million in FY23.

Sales for the year to June 30, fell 18 per cent to $197.6 million while underlying EBITDA declined 173 per cent to $4.6 million.

The average order value grew 4.9 per cent to $79.29 while the average units shipped fell 19.6 per cent to 6.83 million.

Earlier this year, the company implemented a number of cost rationalisation and margin optimisation measures to help manage economic headwinds in its cost base.

Meanwhile, the group’s new CFC – which is operational now – is expected to improve efficiencies, reduce operational costs and support growth.

Booktopia CEO David Nenke said in the next financial year, the business will focus on excelling in key areas that enable the group to stand out in the market.

“Our recent equity raise of $10.9 million, has provided further working capital, helping to increase available inventory for the important Christmas period as well as contribute to the successful transition to our new CFC.

“We are looking forward to launching a series of additional strategic initiatives in the coming months, which will expand the unique selection we offer to readers across ANZ, and improve personalisation and the user experience.”

25 Aug, 2023
Forget retail, Kogan says he’s now running a tech company
Forget retail, Kogan says he’s now running a tech company

Ruslan Kogan says investors should start valuing like a software stock and not as the eponymous online retailer known for its cheap gadgets and tech accessories.

The company booked full-year earnings in line with its latest guidance, with gross sales down 28.4 per cent to $844.8 million and revenue off 31.9 per cent to $489.5 million.

That translated to a 26 per cent drop in gross profit to $136.6 million, and a loss of $25.4 million for the 2023 financial year, narrowing slightly from a $36.2 million loss previously.

The business has worked to run down its inventory, which it accrued after over-buying at the tail-end of COVID-19 lockdowns, and said this had reduced to $68.2 million at June 30, or more than 57 per cent.

However, investors have bought back in to the stock and Mr Kogan believed this was down to advances in its “platform-based” businesses.

He told The Australian Financial Review platform sales exceeded sales derived from its retail inventory for the first time, and that he expected this to grow and reduce its reliance on retail performance. For revenue earned on its online marketplace, gets a commission from other retailers and those paying to advertise their wares.

It also includes Kogan Mobile, Kogan First subscriptions (its version of Amazon Prime), Kogan Internet and Kogan Energy.

Tech-style earnings

Because investors generally valued software stocks with recurring subscription-based revenue more generously than retail stocks, Mr Kogan declared “we are now actually a tech business”.

“If you rewind 17 years to when our business started, 100 per cent of our business was inventory-based sales, and it stayed like that for the first 10 years, before we started to launch more and more of our business to be non-inventory based,” he said.

“In the last six months, the software platform parts of our business have become the majority.”

More than 57 per cent of gross sales and 71 per cent of gross profit was generated from platform-based sales.

“While Apple’s top line continues to grow at a moderate pace, its share price has been going ballistic because everyone’s valuing them like a software business,” Mr Kogan said.

“Even if nobody changes their Apple Mac or their iPhone, their apps and Apple TV subscriptions are going to keep renewing ... And investors see this software revenue as the best for business because it is the least risky and highest margin.”

‘Premature’ change to valuations

The head of small cap research at RBC Capital Markets, Wei-Weng Chen, argued it was premature to value Kogan as anything other than a retail stock, but acknowledged impressive growth in some of its non-traditional businesses such as Kogan First.

“To Kogan’s credit, they have overseen steady loyalty program growth since launching, despite pushing though some pretty large price increases for membership, and active customers declining by approximately 30 per cent since December 2021,” Mr Chen said.

“One way around paying more for digital ads ... is for online businesses to lean more on loyal, repeat customers, which is why growing Kogan First membership is a key focus for management.”

Mr Chen said there were positive signs in Kogan’s results in both its inventory management and unaudited numbers from the first month of the 2024 financial year, which showed $3.5 million of adjusted EBITDA, which compared favourably to $1.5 million last year.

Mr Kogan said the low-cost nature of products sold on meant it would fare better than other retailers during a cost-of-living crisis.

“We’ve done relatively well, and that is driven in part by the fact that we’re not selling Louis Vuitton handbags and BMWs and Rolls Royces, we’re selling value-based products,” he said.

“When the economy is flying, people that want a new TV will just look up the latest Samsung and bang, click, buy, done, but at the minute we are seeing more specification-based buying, where someone works out they want a 55-inch TV that connects to the internet to watch Netflix, and they come to us for a deal.”

Investors have been less convinced, with Kogan shares down 11 per cent at $5.07 on Monday.

15 Aug, 2023
Apple heads for largest Q3 revenue drop since 2016 as iPhone sales slow
Inside Retail

Apple is likely to report a dip in iPhone sales in the April-June quarter as shoppers held out for a new model in a slow economy, making it important for the company to detail how it is using artificial intelligence to augment growth, analysts said.

The world’s most valuable firm will wrap up Big Tech earnings on Thursday, with a likely 1.6 per cent drop in total quarterly revenue, according to Refinitiv – its steepest drop in third-quarter revenue since 2016.

IPhone sales likely fell more than 2 per cent in the period, according to 24 analysts polled by Visible Alpha, compared with a near 3 per cent increase a year earlier and a 1.5 per cent rise in the quarter ended March.

The quarterly report could mark a break from an upbeat earnings season for the likes of Meta Platforms, Alphabet and Microsoft that have shown resilience in their cloud businesses and an uptick in digital ad sales.

“Apple is not immune to general macroeconomic trends and will continue to set the pace (for the smartphone industry) for quite some time,” said Bob O’Donnell, founder of TECHnalysis Research.

With details about the new iPhone 15 expected next month – which could sport the more universally accepted USB-C port on some models – iPhone sales could get a small nudge in the July-September quarter, said analysts, who predicted a mixed bag of results for the period.

Apple traditionally does not provide quarterly outlook, but analysts expect the company may elaborate how it is using AI to improve its upcoming products.

The company has so far avoided buzzwords like AI at its events, in a contrast with tech giants including Alphabet and Microsoft. Last month, Bloomberg News reported Apple has quietly built its own framework to create large language models known as “Ajax”.

“We expect Apple’s updated comments on its AI aspirations to be a focus,” analysts at Well Fargo wrote in a research note, adding that any commentary around the technology could boost the stock.

Apple’s shares have gained more than 50 per cent so far this year, compared with a nearly 37 per cent increase in the tech-heavy Nasdaq Composite.

Iphone slowdown

Much of the weakness in iPhone sales is expected to come from the Americas, where revenue is set to fall 6 per cent, analysts said. Sales from China – Apple’s third-largest market – are expected to be flat due to an uneven economic recovery, though the company has fared better than Android rivals in the country.

Overall smartphone shipments to China declined 2.1 per cent in the second quarter, according to market research firm International Data Corp.

“Most investors feel a soft China could pose a risk to the numbers and further commentary, but Apple’s position in China is on a solid footing and the company is likely to see only a small, if any, decline in iPhone sales,” Piper Sandler analysts said.

“If there is any sales weakness from China, it is likely to be easily offset by strong sales momentum in India,” they added.

Mac and iPad sales are expected to fall by 10.6 per cent and 11.2 per cent, respectively, according to Refinitiv data.

But the services business – home to Apple’s App Store and audio and video streaming services – could be a bright spot thanks to an uptick in the ad market, some analysts said.

The business, which accounts for roughly a quarter of Apple’s total revenue, is expected to grow 5.7 per cent as it also benefits from price increases for iCloud subscriptions, though the pace is broadly similar to that in the preceding three quarters.

15 Aug, 2023
‘Hard yakka’: Atlassian shares soar on strong results
The Australian

Shares in Australian software giant Atlassian soared after it posted fourth-quarter results that beat Wall Street expectations, adding billions to the paper worth of rich list co-founders Scott Farquhar and Mike Cannon-Brookes.

Atlassian shares – listed on the Nasdaq – were up 22.9 per cent in after-hours trading to $US208.50, their highest since October last year, with the company’s bet on nascent AI and cloud computing technologies, as well as what Mr Cannon-Brookes and Mr Farquhar described as “hard yakka” paying dividends.

For the fourth quarter it posted a net loss of $US59m, or 23 cents per share, narrowed from a net loss of $US90.6m a year earlier. Revenue was up 24 per cent to $US939m compared to $US760m a year earlier.

The company said it expected first-quarter sales of between $US950m to $US970m, compared to FactSet analyst forecasts of $US954m.

“We knew we’d be putting in the hard yakka this year, and that’s exactly what we’ve done,” co-founders Mike Cannon-Brookes and Scott Farquhar said in a letter to shareholders.

“Atlassian ended FY23 with over 260,000 total customers and generated over $US3.5bn in revenue in the face of a challenging economy. And importantly, our three biggest bets are paying off, further strengthening our conviction in our strategy.”

Atlassian is now growing its headcount, after shedding around 5 per cent of their total headcount earlier this year, a move they said at the time was about rebalancing its teams rather than reacting to the tech downturn plaguing software companies and their valuations.

The executives said on Friday forays in cloud computing, enterprise and IT service management were all driving revenue growth, and that its continued investment in R&D had enabled it to take advantage of the next generation of AI technologies.

The company now has 262,337 customers, it said its letter to shareholders, slightly below consensus analyst expectations of 264,780 customers.

“We took advantage of mind-blowing developments in AI to bring generative capabilities into our products and unleash even more of our customers’ potential. And we responded to a rapidly shifting environment by rebalancing our teams so we can meet our customers’ needs faster,” the executives wrote.

“In other words, we did what we said we were going to do: play offence.

“There are massive opportunities in cloud, enterprise, and ITSM [IT service management] that will drive Atlassian’s growth for years to come. Plus, tech’s labour market is such right now that we’re able to hire amazing talent who might not otherwise be available.

“These moves set Atlassian up to win over the long term and reflect our enduring confidence in our business model, our strategy, and our team. We aren’t afraid to make tough trade-offs in support of durable growth that others shy away from, even when it may be uncomfortable in the short term.”

It announced its chief revenue officer, Cameron Deatsch, will leave the company at the end of December 2023 after nearly 11 years.

Two of Australia’s wealthiest people, Mike Cannon-Brookes and Scott Farquhar had seen more than $10bn wiped from their estimated wealth this year amid a torrid period for technology companies before Friday’s rise.

Its shares were up about 32 per cent over the year to date however, before the after-hours jump, and compared with a 17 per cent lift for the overall S&P 500 index.

Mr Cannon-Brookes and Mr Farquhar founded Atlassian in 2001 and while the company is listed on the Nasdaq exchange in the US they have chosen to keep its headquarters in Sydney. The company builds enterprise collaboration software for teams, and its products including Jira and Confluence have racked up more than 10 million active monthly users globally.

Atlassian announced its ‘Atlassian Intelligence’ AI capabilities in April, hoping to benefit from the hype and investor excitement around technologies like ChatGPT. It built the functionality in collaboration with ChatGPT maker OpenAI and is embedding AI across all of its cloud software products, including Jira, Confluence and Trello.

Workers will be able to automatically summarise decisions and action items from meeting minutes and ask questions such as “how much can I spend on my home office set up?”, Mr Cannon-Brookes said in April on the ground at the company’s Teams 23 summit in Las Vegas.

“This will enable our customers to be far more productive,” he said. “I think about it as a superpower for individuals to be able to generate things, summarise things very rapidly and it’s almost like giving individuals a multiplier, in terms of a fundamental productivity improvement across all of our software.”


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