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Why Ltd (ASX:KGN) shares are pushing higher again

In morning trade the Ltd (ASX: KGN) share price has pushed higher after announcing its expansion into another area of the retail market.

At the time of writing the e-commerce company’s shares are up 3% to $9.39.

What has Kogan announced?

According to an announcement released this morning, Kogan has signed supply and logistics agreements which will allow it to enter the Australian whitegoods and built-in kitchen appliance market with its own range of products.

Founder and CEO, Ruslan Kogan, decided to make the move into this market due to a distinct lack of competition. This has led to a limited number of players enjoying inflated margins on their products.

Mr Kogan believes this is partly down to the additional complexity and logistical requirements arising from distributing bulky products.

But this is all about to change. He stated that: “Due to the rapid growth of the business over the last 12 years, we are now in a position where our logistics and distribution footprint enables us to enter this market and provide Australians with unprecedented value on a range of the most popular Whitegoods and Built-In Kitchen Appliances like Fridges, Washing Machines, Dryers, Dishwashers, Ovens, Cooktops and Rangehoods.”

Before adding that: “It will be a great win for Australian consumers who don’t want to pay too much for essential household appliances. We are excited to be applying our business model to this industry and making the most in-demand products more affordable for all Australians.”

Details of the exact nature of Kogan’s offering will be unveiled closer to the release date, which is expected to be prior to end of calendar year 2018.

What now?

While this could be good news for Kogan shareholders and Australian consumers, it is likely to be yet another negative for the likes of Harvey Norman Holdings Limited (ASX: HVN) and JB Hi-Fi Limited (ASX: JBH).

The potential loss of margin on these products could be yet another squeeze on their overall margins.

In light of this, I think this is another reason to be bullish on Kogan and bearish on Harvey Norman and JB Hi-Fi.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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