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Why the share price charged 8% higher today

One of the best performers on the Australian share market in morning trade has been the Ltd (ASX: KGN) share price.

At the time of writing the ecommerce company’s shares are up 8% to $3.51.

Why is the Kogan share price charging higher?

This morning Kogan provided the market with a trading update for the all-important Christmas trading period. As you might have guessed from the share price reaction, Kogan returned to form during the period.

According to the release, the company generated record trading in the peak Christmas period with its Black Friday and Boxing Day sales producing record days in the history of the business.

Founder and CEO, Ruslan Kogan, appeared to be delighted with the company’s performance.

He said: “Our team is proud to have delivered the best Christmas trading period the business has ever had. Our customer-centric approach saw us deliver more items than ever, faster than ever. The investments we have made in a nationwide logistics footprint enabled us to delight customers all over Australia with rapid delivery, along with the great value they have come to expect from”

What about the half year?

The strong Christmas trading period means the company expects to report a 9.7% increase in revenue on the prior corresponding period.

Its Exclusive Brands segment grew revenue by 23.6% during the half. Kogan reported a growth rate of 15.7% in the first quarter, which means its revenue growth accelerated in the second quarter.

Partner Brands revenue growth also accelerated in the latter part of the half. Revenue grew 92.8% on the prior corresponding period, up from 73% in the first quarter.

Unfortunately, this wasn’t the case for its Global Brands segment. Management advised that segment revenue decreased 46.7% during the half, driven by the changes in the GST law and the apparent avoidance of GST by a number of foreign websites selling into Australia. In the first quarter segment sales were down 27.4%.

But that didn’t prevent the company from making improvements to its gross margin during the half. After decreasing in the first quarter, improvements in the second quarter mean that its first half gross margin is now expected to be flat on the prior corresponding period.

It also advised that an improvement in marketing returns and efficiency means that its marketing spend grew by 25% year-on-year in the first half, compared to more than 30% in the first quarter.

Other highlights include a 41.6% year-on-year increase in active customer to 1,450,000 and a 102.9% year-on-year lift in mobile active customers.

Should you invest?

The company’s performance in the first quarter of FY 2019 was incredibly worrying, but I am very pleased to see that it has bounced back strongly.

However, I don’t think the company is out of the woods just yet. I intend to keep my powder dry until I’ve seen what impact its rising costs have had on its bottom line.

In the meantime, retail shares such as Accent Group Ltd (ASX: AX1) and Super Retail Group Ltd (ASX: SUL) could be worth a look.

Alternatively, here are three buy-rated growth shares to consider in 2019. All three have been tipped as potential market beaters.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Super Retail Group Limited. The Motley Fool Australia has recommended Accent Group and 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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