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What rich listers Kerry Stokes and Ruslan Kogan both have in common

Two earnings results – one delivered by Boral and the other from e-tailer Kogan.com neatly illustrate how COVID is playing havoc with two of Australia’s crucial sectors, construction materials and retailing.

And it won’t be a cause for celebration for their respective largest shareholders, Kerry Stokes and Ruslan Kogan. Given neither declared a dividend, the rest their shareholder bases will be equally underwhelmed.

The pandemic has damaged these two companies in different ways but the common thread would be COVID’s ability to rob both of predictability and thus their ability to navigate future and current demand for their products.

CEO and founder Ruslan Kogan left with too much inventory.

CEO and founder Ruslan Kogan left with too much inventory.

Kogan.com’s alarming 87 per cent collapse in full-year profit was, in large part, the result of a wrong call about the future consumer demand.

Having experienced a massive lift in 2020 on the back of the glut of online shopping, Kogan.com overestimated future levels of demand and loaded up on stock, which left it with an inventory problem.

That issue then snowballed, as sourcing that additional inventory fed into ballooning logistics and warehousing costs, which then ate into profits. The need to get rid of the bloated inventory required Kogan.com to discount stock, which in turn sliced margins.

It was a classic lose-lose.

The Kogan.com miscalculation raises a broader issue for retailers whose visibility on demand has been seriously impaired by the pandemic. Consumer buying patterns have been disrupted by government mandated store closures, job losses, government subsidies and the overall levels of consumer confidence.

Many received a positive but unexpected shot in the arm last year once the first wave of lockdowns were lifted. But the limited evidence from discretionary retail industry is that the spike in demand has not carried through to this calendar year.

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