The Universal Store Holdings Ltd (ASX: UNI) share price is currently up by 3% after revealing an acquisition.
For investors that haven’t heard of Universal Store, it describes itself as a leading Australian retailer specialising in trend-led and casual men’s and women’s fashion, shoes, accessories, lifestyle and gifting.
Universal Store acquisition
The ASX retail share has announced that it has entered into a binding agreement to acquire 100% of Cheap THRILLS Cycles Pty Limited (CTC), trading as ‘THRILLS’.
THRILLS is a designer, wholesaler and retailer of casual youth fashion apparel.
It’s buying it for an enterprise value of $50 million, representing 6.8 times FY22’s underlying EBIT (EBIT explained). The price is a combination of cash, shares and deferred variable consideration.
Financial implications of this deal
Universal Store revealed that the business made $34.6 million of sales in FY22 and $7.3 million of underlying EBIT.
Management said that this deal would be “highly accretive” for earnings per share (EPS). If it owned the business in FY22, it would have added 18% to EPS.
Why is Universal Store buying THRILLS?
Management said that the business is an attractive business with a “strong track record of growth”.
Universal Store also said that CTC brings “best-in-class brand and product development expertise and exciting prospects for future expansion.”
CTC offers vintage and coastal inspired youth fashion apparel. It also owns various emerging brands at different stages of development.
It will continue to operate as a standalone business, with eight stores and two more planned to be opened by the end of November 2022, as well as an emerging online channel.
CTC has a “strong” wholesale channel, representing 79% of FY22’s sales, including a recently launched US wholesale business.
Management comments
Alice Barbery, Universal Store’s CEO and Managing Director, said:
I am delighted to cement our partnership with the three founders of THRILLS. In THRILLS, Brooke, Tabitha and Ryan have built an iconic youth fashion brand and have a proven capability to deliver products our customers love. THRILLS is currently the highest selling 3rd party brand in our Universal Store business and has been a consistent and growing part of our product offer for over eight years. We are excited by the opportunities a closer partnership can deliver in both product and brand development as well as further expansion of THRILLS direct-to-consumer channel.
Summary thoughts on the Universal Store share price
This seems like a good fit for the business, though time will tell if the price was good or not.
With the Universal Store share price down around 30% over the past year, I think this could be a good time to jump on the business. It even has a solid dividend yield of around 6% including the franking credits.
While I’m not an expert on the retail industry, I think this could be a good time to look at the business with all of the market uncertainty and concerns.
