2 ASX shares that could be worth looking at this weekend

Kogan and Adairs are two businesses that could be good ASX shares to think about this weekend.

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This weekend could be a good time to look at ASX shares that have e-commerce exposure in light of all the lockdowns that are happening around the country.

There is no jobkeeper this time around, but people are still stuck in their houses with limited ways of buying the products that they may want to purchase.

These two ASX shares may be good ones to think about:

Kogan.com Ltd (ASX: KGN)

Kogan is one of the businesses that has seen an acceleration of growth over the last 16 months.

The business sells a wide variety of products through its website including TVs, computers, phones, sports and garden gear, clothes, food and so on. There are also extra services that it sells through third party providers such as insurance, superannuation, energy and mobile.

It has been facing difficulties over the last few months relating to excess inventory and demurrage costs. But prior to that it was seeing economies of scale with rising margins at the gross profit margin, the earnings before interest, tax, depreciation and amortisation (EBITDA) margin and net profit margin lines.

More Kogan active customers and members allows the business to sell more of their products and services to them. Each customer can become more valuable.

Kogan recently told the market how it performed in FY21. It said gross sales grew by 52.5% and gross profit increased 61%. Scale benefits are likely to be felt in future years as the business no longer faces the inventory issues. This year’s adjusted EBITDA only went up 23.1%. But active customers rose 46% to 3.21 million for Kogan.com, with 764,000 for Mighty Ape.

The ASX share said that “efforts to bring down levels of inventory have come a very long way, and inventory is approaching the right level for the business. The company expects improved efficiency moving forward.”

According to Commsec, the Kogan share price is valued at 23x FY23’s estimated earnings.

Adairs Ltd (ASX: ADH)

Adairs is another business that is rapidly growing its online sales. The business says that it’s the largest omni channel speciality retailer of home furnishings and home decoration products. It has two businesses – Adairs and Mocka. Mocka is a vertically-integrated pure-play online home and living products designer. It’s a retailer in Australia and New Zealand, selling products in the home furniture and decoration, kids and baby categories.

In the FY21 first half, group sales increased almost 35% to $243 million, with group online sales of $90.2 million (making up 37.1% of total sales). Adairs online sales increased 95.2% and Mocka sales increased 44.4% to $28 million.

Adairs sees Mocka as an important part of its growth potential. Australian brand awareness is increasing, with website visits up 56%. It has expanded its Australian warehouse facilities to support growth. Management say there’s an opportunity to increase its market share and expand its product categories. If Mocka achieves the same sales to population in Australia as New Zealand, annualised sales could grow from $31.7 million in Australia to $111.3 million.

Larger stores are another avenue for growth for the ASX share. Larger stores are more profitable because it allows the company to showcase more products and categories, while achieving an average increase of 950 basis points to the store profit contribution margin. A typical upsized store delivers between $250,000 to $350,000 more profit annually after upsizing, representing around a 60% average increase in profit. New profitable store opportunities remain.

According to CMC, the Adairs share price is valued at 11x FY22’s estimated earnings.

Should you invest $1,000 in Kogan right now?

Before you consider Kogan, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Kogan wasn't one of them.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended ADAIRS FPO. The Motley Fool Australia owns shares of and has recommended ADAIRS FPO and Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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