2 great ASX growth shares to buy for January

The 2 ASX growth shares in this article are great and may be worth considering in January. One of the ideas is City Chic Collective (ASX:CCX).

| More on:
wooden blocks with percentage signs being built into towers of increasing height

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The two ASX growth shares in this article could be worth looking at in January.

Businesses which are growing profit could be ones to keep an eye on.

Here are two that have big plans for growth:

City Chic Collective Ltd (ASX: CCX)

City Chic has a market capitalisation of around $890 million according to the ASX.

It's a retail business that sells plus-size clothing, footwear and accessories to women. It has a number of brands including City Chic, Avenue, CCX, Hips & Curves and Fox & Royal. City Chic has around 100 stores across Australia and New Zealand. It has websites for local and US customers, it has marketplace and wholesale partnerships with major US retailers such as Macys and Nordstrom, and a wholesale business with European and UK partners such as ASOS and Zalando.

The ASX growth share has a goal of becoming one of the world's leading businesses in the plus-size fashion category. It's furthering that goal with the recently-completed acquisition of Evans from the Arcadia group. Evans is a UK-based retailer of women's plus-size clothing with a longstanding customer base and strong market position.

Evans has been operating for 90 years as a high street retailer. City Chic is buying the e-commerce and wholesale businesses, not the physical store network, for $41 million. For the financial year to August 2020, the Evans website made £23 million of sales with 19 million visits. The wholesale business also made £3 million of sales. The overall group, including the stores and franchise, made £60 million of annual sales before COVID-19 came along.

The rest of the City Chic business has been growing strongly. Despite the difficult COVID-19 conditions, its online sales jumped 113.5% in FY20 and this represented 65% of total sales. Fund manager Chris Prunty from QVG Capital thinks that the e-commerce theme will continue to grow after COVID-19 has passed.

Redbubble Ltd (ASX: RBL)

Redbubble is a online marketplace business that sells a wide variety of artist-produced products such as wall art, phone cases, masks, clothing, stationery and so on. These products are sold through two websites, Redbubble.com and TeePublic.com.

The ASX growth share had a very strong year in FY20 with the shift to online shopping. FY20 marketplace revenue went up by 36% to $349 million, gross profit grew by 42% to $134 million, operating earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 141% to $15.3 million and EBITDA went up 358% to $5.1 million. It also generated $38 million of free cashflow in FY20.

Fourth quarter growth was particularly strong as marketplace revenue jumped 73%, gross profit rose 88% and it made $8.4 million of operating EBITDA.

Growth has continued into the first quarter. Excluding positive delivery date adjustments, FY21 first quarter revenue grew 98% to $139.3 million, gross profit rose 118% and it generated $17.2 million.

At the time of the FY20 result, Redbubble Martin Hosking said: "RB Group's on-demand fulfilment model and differentiated consumer offerings provide us with distinctive advantages. The strong financial performance follows from these fundamentals. It has been pleasing to see the acceleration of existing trends in the last few months. 2021 represents a year of opportunity for the business. We are positioned to build on a decade of momentum and aggressively pursue the global opportunity presented by the shift to online activity and increasing adoption of e-commerce platforms."

Joseph Kim from Montgomery Investment Management said that the ASX growth share has been one of the clear winners from the shift to online. However, whilst the ASX share has clearly been a "stay-at-home" trade, the fundie believes the business has the opportunity to emerge a longer-term structural winner from COVID-19 if it can capitalise in the recent spike in user and customer interest as a result of recent lockdown measures.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Growth Shares

A bearded man holds both arms up diagonally and points with his index fingers to the sky with a thrilled look on his face over these rising Tassal share price
Growth Shares

3 unstoppable ASX shares to buy and hold for the next decade

These shares are going places over the remainder of the decade and beyond.

Read more »

Four piles of coins, each getting higher, with trees on them.
Growth Shares

2 high-growth ASX shares to buy today: brokers

These stocks have a strong growth outlook.

Read more »

Two university students in the library, one in a wheelchair, log in for the first time with the help of a lecturer.
Growth Shares

2 top-quality ASX shares to buy for beginner investors

These stocks could be a great place to start investing.

Read more »

A man in full American NFL playing kit crouches over with his arms across his chest in a defensive stance against a dark background.
Growth Shares

Here's why these two ASX 300 shares are great ones to own

These businesses are two of the fastest-growing stocks in the ASX 300 and are liked by fund manager WAM.

Read more »

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Growth Shares

3 ASX growth shares you'll wish you bought in June

Analysts think these shares could be destined for big things in the future.

Read more »

Father and daughter with hands on a small plant.
ETFs

Focused on growth? Here are 3 ASX ETFs to consider

Growth investors must ignore the current market noise about tariffs and focus on the long-term horizon.

Read more »

A female broker in a red jacket whispers in the ear of a man who has a surprised look on his face as she explains which two ASX 200 shares should do well in today's volatile climate
Growth Shares

Top brokers name 3 top ASX growth shares to buy now

Why are brokers feeling bullish on these names? Let's find out.

Read more »

Two plants grow in jars filled with coins.
Growth Shares

3 ASX 200 growth stocks up more than 100% in 1 year that could charge higher

It's been a memorable year for shareholders of these 3 companies.

Read more »