The e-commerce sector is booming right now. In this article we look at two of the leading providers in this segment: Temple & Webster Group Ltd (ASX: TPW) and Kogan.com Ltd (ASX: KGN).
Here's why both of these ASX shares are in my buy zone right now:
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Temple & Webster
Temple & Webster has evolved to become the leading online retailing platform for furniture and homewares. This is not a product category traditionally associated with online shopping. However that is now changing, as the online shopping channel further evolves.
The trend towards the online channel for retail shopping has definitely accelerated during the coronavirus pandemic. And Temple & Webster is an online retailer that has proven to be highly successful during this period. This is reflected in the online retailer's recent financial results. Total revenue for FY 2020 for Temple & Webster grew by 74% to $176.3 million. Revenue growth during the second half was particularly strong, up by 96%. The Temple & Webster share price has also risen strongly recently, up from $1.52 in late March to now be trading at $8.08.
I am particularly attracted to Temple & Webster as an online retailer because it is a capital light business – about 80% of its online sales don't require the company to hold any inventory in its warehouses.
I am confident that Temple & Webster is well-placed to tap further into the shift towards the online retail channel for furniture and homewares over the next few years. This I believe, will lead to above average share price returns.
Kogan.com
Kogan is another e-commerce retailer that has seen a surge in sales during the coronavirus pandemic. The company recently revealed that gross sales climbed by more than 95% during the final quarter of 2020, compared to the prior corresponding period. Gross profit was up 115%, while EBITDA surged by 149%. There has been particularly strong demand for office and education-related equipment such as PCs and laptops. Kogan's fast-growing Kogan Marketplace in particular continues to be a strong performer.
This strong growth has been reflected in a surging share price, up from below $4 in mid-March to now be trading at nearly $19.
Kogan has now cemented its market position as a leading local pure online retailer catering for a broad range of items, in a similar fashion to how Amazon operates on a global basis. I believe that Kogan is well-placed to make further market inroads in the years to come. It is now also a more diversified company catering for a broad range of verticals such as internet, mobile, energy and credit cards.
Foolish Takeaway
Temple & Webster and Kogan are 2 ASX shares that have successfully tapped into the growing demand for online shopping in recent months. I am confident that both are well-placed to continue their growth trajectory over the first few years.
