They may be Australia’s largest online bookstore but based on Booktopia’s (ASX: BKG) results, books were not popular at all over Christmas as orders waned and revenue fell significantly compared to the previous retail season.
For the Half Year ended 31 December 2023, Booktopia reported $86.3 million, marking a substantial 22% decrease compared to the same period in the previous year. Units shipped also experienced a significant decline, down 21% to 3.1 million.
The primary reason cited for this downturn is the operational disruption caused by the transition to Booktopia’s new Customer Fulfilment Centre (CFC) located in Strathfield South. This transition resulted in lower inventory levels and longer delivery times, impacting sales. Additionally, marketing efforts were scaled back to manage demand during this transition phase.
Even with the pullback in marketing spend, Booktopia reported a Net Loss After Tax of $16.7 million, more than 4x times the $3.9m loss reported for the previous corresponding period. It also wasn’t helped by the $2.2 million paid as part of a fine levied on Booktopia for misleading statements around their refund policies. Frustratingly for shareholders, the total fine is $6 million, so further payments will be incurred in future reporting periods also.
Similarly, statutory EBITDA recorded a loss of $4.6 million, a decrease of $5.9 million compared to the previous year. These losses were primarily attributed to significant one-off costs associated with the CFC project, including the implementation of a new warehouse management system and consultancy fees related to the transition.
In response to the disappointing financial performance, Booktopia implemented an operational restructuring with the Company hopeful of realising some of these benefits in FY25.
Despite the challenges encountered during the Half Year, Booktopia reported improvements in operational efficiency during the second quarter, particularly in cost efficiency and customer delivery timeframes, albeit at higher-than-planned costs.
Looking ahead, Booktopia remains optimistic about its FY24 prospects, forecasting an underlying EBITDA between $1 million to $3 million. The Company is proceeding with a strategic review, with Ellerston Capital Solutions appointed as its financial advisor for this process.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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