Could the surging e-commerce space position some retail companies as leading ASX growth shares? Here are two Aussie retailers that I think could outperform household ASX growth shares.
2 retailers that could be top ASX growth shares
1. Kogan.com Ltd (ASX: KGN)
The Kogan share price has been relentless in 2020 and is up nearly 170% this year. During this period, the company also launched a $100 million capital raising to provide the financial flexibility to act quickly on future value accretive opportunities. Previously, Kogan acquired and integrated iconic Australian retailers such as Dick Smith and Matt Blatt. This is the company's first capital raising since its initial public offering (IPO) in July 2016 and could open the door for more exciting opportunities.
Kogan continues to kick goals with its recent business update highlighting its continued success amidst COVID-19. The update reported active customers increased to 2,461,000 as at 31 August 2020. This included an incremental 152,000 customers in the month of August, and the largest monthly increase in the history of the business. Furthermore, Kogan's gross sales have grown more than 117% year on year, gross profit grew more than 165% and adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) has increased more than 466%.
The Kogan business is firing on all cylinders with a strong balance sheet to explore potential acquisitions. I believe the company is a reasonably valued ASX growth share at its current price, however the recent weakness in the market could also present an opportunity to buy Kogan shares at a cheaper price in the future.
2. Redbubble Ltd (ASX: RBL)
The Redbubble share price has delivered a staggering 300% increase so far in 2020. The company's operations are along the same lines as Etsy Inc (NASDAQ: ETSY), a US $13 billion e-commerce marketplace focused on arts and crafts. COVID-19 has accelerated consumers' appetite for e-commerce and Redbubble believes these structural shifts are likely to endure in the medium to long term. In FY20, the company's marketplace revenue increased 36% to $349 million, EBITDA increased 358% to $5.1 million and its closing cash balance was $58 million at 30 June 2020. During Q4 FY20, Redbubble's growth and profitability greatly accelerated with 4Q20 marketplace revenue of $103 million, up 73% on 4Q19.
From a revenue perspective, Etsy trades at approximately 12 times revenue compared to the 3 times of Redbubble. Even though Redbubble shares have soared 300% this year, I believe there could be more gas in the tank. While the near-term volatility could see some wild swings in the Redbubble share price, I believe its shares could definitely go higher in the medium to long term.
