Thoughts please on Universal Store (UNI)?
Hi guys Your thoughts on Universal Store Ltd (UNI) - a no. Of directors have been buying shares and they reported well and have a div of around 7% Thanks Tony
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Hi Tony,
In May, the clothing retailer announced they expect record sales in FY23 with “material growth in EBIT,” guiding to $39-41m, however this was below market expectations and hence shares fell to all-time lows. We’ve then seen sales trends taper off further in June which saw a downgrade and analysts recut their numbers lower. Remember, UNI was on a big multiple because they had great growth, and their target market (youth) was showing less impact from cost-of-living pressures (parents wearing this) and were actually net beneficiaries of a tight labour market (easy to get a part time job and then buy clothes). Evidence suggests this trend has now changed, and the youth market has tightened, which was the basis of their last downgrade.
Shares have rallied around 25% from lows, supported by some insider buying – 3 directors have picked up ~450k shares in total since the downgrade. It’s cheap, on around 10x expected PE and a ~7% expected yield, and management does have a history of great execution, however we suspect their growth will be slower and more measured given fewer stores being rolled out in this tougher environment.
We like, just still a bit cautious on discretionary retail.
