The Universal Store Holdings Ltd (ASX: UNI) share price has sunk 25% after giving a FY23 update.
It owns a portfolio of four different brands – Universal Store, THRILLS, Worship and Perfect Stranger. These are focused on selling ‘on-trend apparel products
‘ to a target of 16 to 35-year-olds.
FY23 update
The business warned that there is a deteriorating economic environment, which seems to be putting pressure on youth customer’s discretionary spending levels. It said that trading conditions have tightened, which is expected to continue in the coming months.
But, it is “on track to deliver record sales” in FY23, the new stores have performed well and the business has “successfully adjusted its offering to cater to the changing preferences of customers.”
The ASX share said that Perfect Stranger is “performing well and continues to demonstrate its strong potential for an economically attractive national roll out”.
Universal Store said that its group margins and business unit inventory levels have been “well managed” against a backdrop of increased promotional discounting activity from peers.
FY23 guidance
In FY22 it made $208 million of sales, in FY23 sales are expected to be between $258 million and $261 million.
Management are expecting the FY23 gross profit margin to be “moderately” above the 61.1% achieved in FY22.
Underlying EBIT (EBIT explained) in FY23 is expected to be between $39 million and $41 million, which compares to $32.6 million in FY22.
It’s expecting to have a total of 95 stores as at 30 June 2023, which would include 77 Universal Stores, eight Perfect Stranger sites and 10 THRILLs stores. Four new store openings, expected in the FY23 second half, are now expected to open in the first quarter of FY24.
Final thoughts on the Universal Store share price
It’s unfortunate that the ASX share has suffered so much today, but this could be a longer-term opportunity. When things are a bit worse than expected, investors can sometimes overreact.
I think conditions will improve within two of three years, making this an opportunistic time to invest in this business which is growing store networks for multiple brands.
