A recent article in the Australian Financial Review has highlighted that the market capitalisaion of Kogan.com Ltd (ASX: KGN) is 5 times that of Myer Holdings Ltd (ASX:MYR). Here’s what has led to the boom in the Kogan share price and what the future looks like for the online retailer.
Coronavirus sees sales boom
Late last week, Kogan released a market update that provided a glimpse of how the coronavirus pandemic has positively impacted the company. As at 31 May, Kogan saw its active customer base grow to over 2 million, with 126,000 additional customers joining the company in May.
Kogan also reported a 100% increase in gross sales across the April and May period in comparison with the same period last year and also reported a 130% surge in gross profit for the period. As a result, the company’s financial year-to-date EBITDA grew by more than 50% to the end of May.
Dominating the future of retail
Kogan’s stellar performance comes as sales in the broader retail sector fell a record 17.7% for April. The coronavirus lockdowns saw online sales boom as consumers flocked to set up home offices, whilst also fulfilling their discretionary needs from home isolation.
The company’s outstanding sales results have been reflected in the Kogan share price, which is currently trading near all-time highs. This comes after the Aussie etailer’s shares surged an amazing 255% from their late-March lows. As a result, the company has a current share market capitalisation of approximately $1.16 billion. This market value is more than 5 times that of department store giant Myer, which tips in at a market cap of a little over $220 million.
Kogan has looked to expand its market share by acquiring furniture and homewares retailer Matt Blatt last month. By relaunching the business online, Kogan is looking to solidify its dominance of the retail sector by competing with other homewares giants such as Adairs Ltd (ASX:ADH).
Is the current Kogan share price a buy?
In my opinion, the coronavirus pandemic could have fast-tracked the changing of the guard in the retail sector. As consumers opt for the convenience of online shopping over traditional brick and mortar shops, online retailers like Kogan.com could be poised to boom in 2020 and beyond.
Having said that, the Kogan share price has had a remarkable ascent from its lows in mid-March. As a result, I won’t be rushing in to buy at the current price. Given the potential for growth in the online retail sector overall, however, I think it would be wise for investors to compile a watchlist of ASX online retailers with the potential to thrive over the next 20 years.
Take a look at this report to find more growth stocks like Kogan.
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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Kogan.com 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.