STOCK WATCH: CEO’s Shock Exit, Booktopia Plummets, Kogan Dives

Natasha Sholl By Natasha Sholl | 04 May 2022

The ASX was rocked by news that CEO Tony Nash will be stepping aside, but was the writing on the wall? And who will be next?

E-Commerce performance on the ASX has seen its worst week of the year, with Q3 results and shock announcements causing share prices to plummet. On top of this, The Reserve Bank of Australia (RBA) has increased the interest rate by 25 basis points to 0.35%. While not a surprise, it did happen perhaps sooner than what was expected.

Causing waves on the ASX, Booktopia released its trading update and also announced that its CEO, Tony Nash, would be stepping aside. Nash will remain as CEO until a replacement is appointed, and then transition responsibilites to the new CEO. “I mentioned to my Chairman and one of the Directors almost six months ago that this could be a good option to bring on a CEO,” Nash told Power Retail yesterday, but the decision was actually made at the end of last week. “The Board decided that having me and a new CEO as part of the Executive Leadership Team in the organisation puts us in a much more resilient position. It addresses succession planning considerations and many other opportunities.”

Nash said the decision was in the best interests of Booktopia and would give the company the best opportunity to balance the demands of complex operations while remaining a high growth business. In response to the announcement, Booktopia’s share price dropped 24% to $0.48 (from $0.64). Investors were clearly spooked not just by Nash stepping aside, but also the Q3 performance.

“Building Booktopia from a budget of just $10 a day in 2004 into Australia’s leading online book retailer has been an incredibly rewarding journey,” he said. “As an entrepreneur, my natural talent is making the invisible visible. I look forward to continuing to find ways to grow the business while handing over the duties that come with being the CEO of a larger and listed entity. It’s time to hand over the leadership reins to someone who is more capable than me at that job description.”

Booktopia’s revenue for the quarter fell 1% over the prior corresponding period to $64.5 million. Management said that the disrupted start to the academic year was a contributing factor, impacting revenue from academic book sales. EBITDA fell 65% to $1.5 million (due to the combination of increased operating expenses and lower academic book sales). Revenue for the nine months to 31 March is now up just 9% to $194.7 million and its EBITDA is down 63% to $5.5 million.

Booktopia provided full year guidance, flagging a number of initiatives to “create the step-change needed to reset the business”. Booktopia expects to deliver full year revenue of approximately $242 million and EBITDA of $3 million to $4 million. NPAT for the year is expected to be a loss.

It closed at $0.45 on Tuesday, a 37.5% loss over a seven day period, making Booktopia the worst performer on the ASX Listed E-Com Index.

Source: ASX Listed E-Com Index Performance based on ASX reporting for the period

The Kogan share price is continuing to be hammered following its quarterly update. Credit Suisse has now downgraded Kogan’s shares to an underperform rating, slashing its price target by almost a third (to $3.75). It closed on Tuesday at $3.73, a 23.9% drop over seven days.

In its third quarter, the company announced that Kogan gross sales are down 3.8% to $262.1 million with gross profits down 11.2% to $41 million. EBITDA is down 110.5% to a loss of $0.8 million.

Its poor performance has largely been blamed on management failing to forecast softening sales, with inventory positioned for elevated growth. It’s another case of demand not meeting expectations and inventory management continuing to plague the pureplay retailer, with inventories of $193.9 million at the end of the period.

“While market conditions are challenging at present, the foundations laid over the last 16 years are holding us in good stead. Our current focus on recalibrating inventory levels and core operational costs is aimed at returning the Company to its historical margins and also to position the business for its next phase of growth,” said Founder and CEO, Ruslan Kogan.

Bike Exchange is down to 7.4% in the last week to $0.05, Redbubble is also down 7.4% in the same period (to $1.10) and even the usually steady Temple & Webster is down 12.1% to $5.40.

MyDeal and Adore Beauty seem to be the outliers this week, with their performance steady post Q3 reporting. MyDeal is actually up 4.9% over the last week, to $0.64 making it the best performer on the E-Com Index. Adore Beauty closed at $1.70, with share price growth of 3.7% over the same period.

MyDeal recorded gross sales of $60.4 million, increasing 35.2 percent on PCP and revenue up a ‘staggering’ 92% on PCP, reaching $16 million. MyDeal also reported a record number of active customers, surpassing one million and increasing 15.4%.

Sean Senvirtne, the CEO of MyDeal said: “Returning customers continue to grow, now accounting for 61.8 percent of all transactions, which is testament to our continued focus on user experience and personalisation across platforms including the MyDeal app, as well as the attractiveness of our In-stock range which continues to show strong growth momentum.”

MyDeal reported a negative cash flow of $9.9 million for the quarter, which is in line with expectations, and ‘primarily reflected seasonality’ in the timing of payments and build-up of working capital, the business shared. MyDeal remains well capitalised, and currently has $29.2 million cash at bank as at 31 March 2022.

“Given the growth we are experiencing and the confidence in our value proposition, I am pleased to reaffirm that MyDeal is on track to deliver to our FY22 Gross Sales guidance of $270 million, which will position us on the pathway to achieve $500 million Gross Sales and positive EBITDA by FY25,” Senvirtne said.

Adore Beauty reported that revenue for Q3 is up 9% on PCP to $42.7 million. Active customers increased 7% to 880,000 and returning customers are up 47% compared to PCP. Loyalty members contributed more than 60% of total revenue. While Adore’s performance on the ASX in recent times hasn’t been pretty, it seems this relatively strong quarter (especially in the context of other e-commerce players) has provided a boost.

“Adore Beauty has delivered a strong quarterly performance in a reopening environment, a very pleasing outcome given the 47% revenue growth recorded in the PCP, and having to navigate some supply chain pressures during the period. Importantly, our loyalty-focused strategic initiatives are enabling us to convert new customers to loyal, valuable returning customers,” said Adore Beauty CEO Tennealle O’Shannessy.

The Cettire share price has also been on a downwards trajectory, and its Q3 results have done nothing to change this. CEO and Founder Dean Mintz said of the company’s performance that the business “continued to grow very strongly through Q3, driven by increased site traffic, substantially higher active customer numbers and repeat purchasers, which represented more than 50% of gross revenues in the quarter”. The luxury fashion retailer reported 246,880 active customers, 185% growth on PCP. Interestingly, average order value was actually 2% down for the quarter, at $682 compared to $695 for Q3 FY21. Conversion rate was also down (0.75% compared to 1.01% PCP). Gross revenue was however up, at $70.2M. The companies growth strategy seems to rely heavily on the release of its mobile app. It has dropped 21.5% in the last seven days to $0.62.

Recent performance on the market can largely be attributed to reopening and the post-lockdown landscape, with travel and brick & mortar back on the cards for consumers as well as supply chain pressures. While it’s clear that the e-commerce boom has shifted consumer behaviour forever, investors are turning away from online retailers who are struggling to maintain the levels of growth seen over the last two years.

They say insanity is doing the same thing and over and over and expecting different results. While in the short term, the Booktopia share price has obviously suffered, will we soon see leadership shake ups across the board? With growth clearly a focus for all e-com businesses moving forward, Nash stepping aside may be the first of many changes we see in this space as companies attempt to recalibrate and remain competitive.

Figures are current as at close of ASX on 3 May 2022. This is analysis only and not intended as investment advice.

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