E-commerce group Kogan.com (ASX: KGN) has written down the goodwill on its Mighty Ape acquisition to the tune of $46.3 million after challenges in the wake of a website upgrade for the digital marketplace in October last year.
The group acquired Mighty Ape, one of New Zealand’s largest online retailers with a focus on gaming, toys and other entertainment categories, in December 2020 for $122.4 million, bringing an additional 690,000 unique customers into the fold at the time.
That figure has barely changed in more than four years with Mighty Ape's active customers sitting at 700,000 when Kogan released its FY24 annual report, compared to 1.9 million for Kogan.com.
In May the company indicated the Mighty Ape website upgrade had affected sales performance and inventory levels, although several stability issues had been progressively resolved as the team worked towards restoring marketing efficiency.
At the time Kogan noted that early signs of recovery were evident with gross sales showing positive momentum driven by a rapid scale-up of the marketplace, with right-sizing of inventory levels to continue.
In today's announcement the group says the write-down of goodwill reflects a recognition of the poorer-than-expected trading performance and longer than anticipated recovery from platform technology challenges that followed the upgrade.
"This was compounded by the recent challenging retail environment in New Zealand marked by weak consumer confidence," the group says.
"While the company continues to believe that the Mighty Ape business will return to positive trading performance in the second half of FY26, the board considers the write down of goodwill to be a prudent measure notwithstanding their ongoing confidence in the Mighty Ape business and brand.
"The goodwill impairment is a one-off, non-cash measure that will not impact adjusted EBITDA."
At last year's annual general meeting (AGM), the group's founder and CEO Ruslan Kogan highlighted the August 2023 launch of the Mighty Mobile in partnership with One NZ, with plans for more verticals to be introduced under the Mighty Ape brand.
The loyalty program Mighty Ape PRIMATE saw subscriptions increase by more than 35 per cent in FY24.
KGN shares are down 2.38 per cent at $3.905 in morning trading at the time of publication.
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