Kogan’s (ASX.KGN) gross sales are up 13% year on year over the 10 months to April 2026. Solid sales momentum in Australia is more than offsetting declining sales in New Zealand. Profit margins are expanding, helped by moderating losses in New Zealand. Shares jumped 17%.

Why it matters: The update is impressive, given Australian shoppers are tightening their belts as rising inflation and cash rates cut into household budgets and weigh on consumer sentiment. Like other discretionary retailers’, Kogan’s sales momentum is slowing.

  • But sales growth is well above cost inflation, and margins are widening. Group profit is tracking ahead of our previous forecast, and we lift our fiscal 2026 EPS estimate by 7% to $0.17.

The bottom line: We maintain our fair value estimate at $9 for no-moat Kogan. Shares are significantly undervalued. Based on our unchanged forecast for fiscal 2026 dividends of $0.16, it offers a fully franked yield of 4%.

  • Looking past currently elevated cost-of-living pressures, we think Kogan’s earnings potential is solid and forecast a five-year compound annual growth rate in earnings per share of 33%.
  • We expect most fuel-related inflation to abate. And while money markets expect another rate hike this year, the Reserve Bank of Australia’s current restrictive setting is likely to unwind by midcycle.

Between the lines: After ramping up marketing to capitalize on the exit of online competitors, we anticipate a more balanced approach to marketing spending and market share gains.

  • We assume marketing as a percentage of sales falls to 13%, down from 16% in the first half, with the aim of holding its 2% share of Australian e-commerce.

Key stats: In Australia, sales growth eased to 13% in the second half to April, from 21% in the first half. Nevertheless, underlying EBITDA is up 70%, with margins up over 3 percentage points.

Kogan Distributing Excess Capital Via Dividends and Buybacks

Kogan’s business strategy is broadly based on low-price leadership. However, as the competitive outlook intensifies from both Amazon and omnichannel retailers, Kogan is adjusting by launching a new online marketplace and building businesses like Kogan Mobile and Kogan Energy. Compared with new entrants and most traditional retailers, while replicable we believe Kogan is far ahead on its supply chain, operational automation, IT, and sourcing capabilities. It outsources delivery and uses third-party logistics providers for warehousing, but has built a proprietary least-cost routing system that automatically calculates the best carrier depending on the article ordered.

Kogan’s strategy for its exclusive and third-party brand products sales is to drive growth in its platform-based sales. While product segment sales are slightly loss-making on the EBITDA line, platform-based sales are very high-margin. Platform-sales margins have gross margins of virtually 100% and EBITDA margins of around 50%. The platform business is scalable, and, if successfully growing, can support material group operating margins expansion over time.

Platform sales include Kogan’s marketplaces in Australia and New Zealand, as well as its Kogan First and Primate loyalty programs.

We see great potential in Kogan’s relational business growth through its Kogan First membership model. Kogan First is a loyalty subscription service that allows users to pay less for products and delivery and gives access to exclusive offers. Kogan First has seen impressively fast user adoption since it launched in 2019. The majority of subscribers are on annual plans, and Kogan First members contributed about 50% of product gross sales in fiscal 2025.

Bulls Say

  • Kogan is well placed as a pure-play online retailer due to structural tailwinds from online migration.
  • Kogan First has the potential to double its current subscriber base, growing the recurring income stream it generates and strengthening customer loyalty.
  • Marketplace is expected to significantly improve margins as sellers cross-list on its marketplace for greater exposure.

Bears Say

  • Consumer discretionary spending and sales growth is vulnerable to the economic cycle. In the longer term, growing competition from Amazon and omnichannel retailers could erode Kogan’s market share.
  • The smaller New Zealand Mighty Ape business is challenged with a cyclically weak consumer and grappling with the fallout of technical difficulties. There is risk the business never recovers to its former performance.
  • The exit of online pure plays like Catch Group and Mydeal are near-term tailwinds, but this source of traffic growth to Kogan’s site could wane in the longer term.