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Why the Kogan share price can beat weak Aussie retail data

The Ltd (ASX: KGN) share price has been surging higher in 2019 towards its current $7.11 per share level.

Making the company’s success even more impressive has been the difficult environment facing Aussie retail in the last 12 to 18 months.

Weak Aussie retail data hit competitor JB Hi-Fi Ltd (ASX: JBH) hard in yesterday’s trade in a mixed day for the ASX 200.

The JB Hi-Fi share price fell 2.18% yesterday on the weak retail news but the Kogan share price remained immune from the news.

So, what’s the difference between the two and why can Kogan weather the retail storm in 2020?

Why the Kogan share price is still going strong

Part of Kogan’s success can be put down to its online-only business model which cuts costs and reduces the reliance for foot traffic.

According to the Australian Bureau of Statistics, seasonally adjusted sales rose by 0.2% while volumes were flat.

I can’t see any real reason why JB Hi-Fi shares would be hit harder than the likes of Harvey Norman Holdings Ltd (ASX: HVN). I’d see this as more of a chance for the market to readjust the JB Hi-Fi share price from its lofty levels.

Despite the bleak retail news, however, the Kogan share price continued to climb higher on Monday and is up 107.06% this year.

Kogan’s diversification certainly helps in times like these as it has branched out into travel, consumer credit, insurance and many other fields.

Kogan looks to be modelling itself on an Inc-type conglomerate play and the Kogan share price proving its success thus far.

Is there still time to buy?

While Kogan shares have been surging higher this year, they are quite expensive at the moment. The Kogan share price is sitting at $7.11 per share which is 39x the company’s earnings.

Given the company’s 52-week high is $7.50 per share, I think I’d be sitting tight until February rather than jumping on the momentum train right now.

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Motley Fool contributor Kenneth Hall 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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