Booktopia in a bind as staff shortages leave imprint

Online bookstore giant Booktopia (ASX: BKG) has reported earnings fell by 49 per cent to $4.1 million for the December half as lockdowns across Sydney led to labour shortages.

The group’s distribution centre in Lidcombe was subject to some of the most restrictive lockdowns in New South Wales, which made managing the facility “difficult” throughout 1H22.

Due to problems staffing the centre, distribution costs increased from $1.42 per unit to $1.65. To manage the strain, the company onboarded new permanent full-time employees.

Anticipating a rush of holiday purchases, Booktopia leased a new 1.3-hectare storage facility in Sydney's inner-west. However, the warehouse commissioning "did not go to plan" and with the arrival of Christmas forward orders, the business' ability to unpack stock was "significantly hampered" in November. 

The 14,000sqm Lidcombe warehouse was also disrupted by the implementation of robotics systems, which the company invested $25 million towards.

“We didn't make as much profit as we set out to do but in saying that we've made a lot of headway in the past six months,” Booktopia CEO Tony Nash told a webinar.

“Wages were up in the distribution centre. We're in one of the LGAs (local government areas) where we were in the strictest lockdown in Q1. When one person had to isolate, a whole team had to isolate.

“Thankfully in all of this time we haven't had one transmission in the workplace. We’ve had positive cases outside of Booktopia during Delta and even in the building during Omicron. Each one was dealt with properly.

Nash emphasised the company has kept health measures in place to ensure the safety of staff despite restrictions easing.

“For example, we still have each shift going home 15 minutes early before the next shift starts. The next shift starts 15 minutes later than it would normally to create a 30-minute buffer so no one crosses paths,” he said.

“Just because we're vaccinated and a lot of the restrictions are behind us doesn't mean we haven’t stopped taking care of our people

“This all comes at a cost and we're really looking forward to returning to normal operations and making every minute as productive as it should be.”

Despite the labour shortage, a record 4.7 million units were shipped for H122, with the average order value increasing to $73.31 from $71.07.

Earnings also grew to a record $130 million, reflecting a 15.5 per cent increase year-on-year.

The Australian Competition and Consumer Commission (ACCC) announced in December 2021 it would be taking the online bookstore to court, alleging the company had made “false or misleading representations to consumers about their rights to refunds and other remedies for faulty or damaged goods"

"On its website between 10 January 2020 and 2 November 2021, Booktopia allegedly represented that consumers had to notify it of a faulty, damaged or incorrect product within two days of delivery to have a right to a refund or other remedy, and that consumers had no right to refunds on certain products, including digital content and eBooks, in any circumstances," the ACCC said.

“Consumers who buy digital products or buy products online have the same rights as those who shop in physical stores,” ACCC chair Rod Sims said.

“Consumers are not limited to a two-day period in which to notify a seller of problems with the product they have purchased.

“We allege that Booktopia misled consumers about their rights to refunds or other remedies, and did not allow them to make use of their consumer guarantee rights.”

Nash confirmed the company is “working with the ACCC” and are “cooperating with them and their lawyers” to resolve the issue.

“We have been on the front foot with them and working through any issues…so we can get back on track,” he explained.

“Of course, [it is] still an outstanding matter. We're working through it right now.”

The company notes “operations have largely returned to a more normal environment” as New South Wales and other parts of the country have opened up.

Nash said the group remains optimistic about future growth despite the challenges presented by the broader economic conditions.

“Our immediate priority is ensuring our business is flexibly able to adjust to the high levels of uncertainty being experienced by e-commerce businesses whilst improving long term returns for shareholders,” he said.

“Our goal remains to be at the core of the Australian book industry underpinned by an efficient, customer-led retail offering that continues to secure a growing market share of the growing online book market.

“To achieve that goal, we need to future-proof the business by ensuring we have ready access to high quantities of the most popular titles and the ability to get them to customers efficiently and quickly.”

The company reported a net loss after tax of $633,000 which is significantly better than the $19.8 million loss in the prior corresponding period, although the bulk of that came from costs relating to the IPO.  

The company’s shares have fallen by 62.3 per cent to $1.13 each since their peak 52-week high of $3.00 per share.