The Kogan share price is down 6% this last month

The Kogan share price has fallen over the last six months.

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The Kogan.com Ltd (ASX: KGN) share price has fallen by 6% over the last month.

Indeed, it has actually dropped by over 10% since 19 July 2021.

Trading update

On 21 July 2021, the e-commerce business released a trading update.

In it, Kogan said that after a continued focus on 'improving customer value', the trading performance in June 2021 saw an acceleration in the delivered gross sales, gross profit and adjusted earnings before interest, tax, depreciation and amortisation (EBITDA).

Kogan also told investors how it had performed in FY21 with some of its financial numbers.

FY21 gross sales grew by more than 52%, revenue rose more than 56% and gross profit went up by more than 60%.

However, adjusted EBITDA only increased by around 23%, suggesting a sizeable decrease of the adjusted EBITDA margin over the last six months of FY21.

Active customers went up 46% over the financial year to 3.2 million. Mighty Ape finished with 764,000 active customers.

The company's total inventory amounted to $228.1 million at the year end, with $191.8 million in warehouses and $36.3 million transit. Management said this reflected a significant unwinding of inventories received during the second half. The inventory issues could be a sizeable reason for Kogan share price's decline.

In the latter stages of 2020, Kogan thought the customer level of demand seen in the first half of FY21 would continue in the second half, and potentially grow further still. So the e-commerce business invested in inventory and operational capacity to be able to fulfil that growth.

But that demand didn't eventuate. The company ended up with too much stock.

Kogan has been focusing on "strong promotions" to bring inventory to the right level for the size of the business. This, combined with high warehousing costs, impacted the financial performance in the second half.

Management revealed in the trading update that the efforts to bring down levels of inventory have "come a very long way" and inventory is "approaching" the right level for the business.

Is there hope of a recovery for the Kogan share price?

Kogan is expecting improved efficiency from here with its inventory and operations.

The CEO of Kogan, Ruslan Kogan, seems confident on the business being able to keep offering a better service for customers. He said:

More customers than ever are turning to Kogan.com for convenience, range and price. We are proud to have been able to service more than 3 million Australians during the challenging year behind us, all while expanding our warehousing operations, enhancing Kogan First membership rewards, and rolling out new exciting projects that will further improve delivery times and customer experience in the near future.

The broker Credit Suisse has a positive outlook on the Kogan share price, despite the inventory issues that it has been facing. Credit Suisse thinks that Kogan shares represent good value.

Its price target for Kogan is $15.21, suggesting a potential rise of over 40% over the next 12 months. Using the broker's earnings estimate, the current Kogan share price is valued at 30x FY22's estimated earnings.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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