Kogan’s Shares Plummet Thanks to New GST Regulations

April Davis By April Davis | 30 Oct 2018

Less than two months since Kogan’s founders offloaded a further $40 million in shares, the company’s stock has taken a big hit, dropping by almost a third when the market closed on Monday afternoon.

Since the Australian government introduced its new GST regime in July, sales from Kogan’s international brands have reportedly dropped by as much as 27 percent.
According to the company, direct import sales, which accounted for 18 percent of the marketplace’s business in 2017, have fallen 27.4 percent in the first three months of FY19 when compared to last year’s sales.
Since July 1 this year, any goods purchased from international retailers/sellers that are valued $1,000 and under have been subject to GST charges. The update in international GST legislation also applies to Australian retailers that employ a drop shipment model.
Finder.com.au predicted earlier in the year that the Government’s new laws surrounding overseas purchases would cost online sellers a total of $583 million within the first 12-months. When the new legislation came into force, Kogan declined to comment on whether or not it was concerned about the impact extra taxes could have on its bottom line.
After news broke that Kogan was feeling the pressure from GST charges and increased competition for discounted goods and gross margins, its shares fell by a whopping 33 percent to a low of $3.11. This is the lowest Kogan’s share price has been since August 2017.
Kogan claims the application of GST to its sales is just one factor contributing to its lower sales, also blaming the international sellers who have allegedly been avoiding GST charges by employing dodgy tactics.
According to founder and CEO, Ruslan Kogan, growth in its Global Brands division has been challenging, but it has seen growth in its broader portfolio.
“We have built a resilient portfolio of businesses, with the core divisions continuing to show healthy growth,” he said.
“We continue to execute our long-term strategy to grow our e-commerce footprint and make the most in-demand products and services more affordable for all Australians.”
In its trading update on Monday, Kogan said that sales of its private label products are up 16 percent year-on-year in Q1, while domestic third-party goods represent a growth of 73 percent. Active customers on the site have also increased by 41 percent, bringing total numbers to 1.45 million.
However, news of positive sales growth has been overshadowed by the company’s continued struggle with the international division of its marketplace.
It’s been a rollercoaster year for the online marketplace, with co-founders Kogan and David Shafer offloading more than $100 million in shares this year alone. As a result, the company’s stocks have been put through the works, with losses since June totalling 68 percent.
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