Stellar result for Universal Store as profit rises 90 per cent

Stellar result for Universal Store as profit rises 90 per cent

Universal Store CEO Alice Barbery

Brisbane-headquartered fashion retailer Universal Store (ASX: UNI) will increase its store count by around 10 per cent between now and December, following strong sales in its first year as a listed company.

The ambitious roll-out for seven new stores in the December half comes despite a 20.7 per cent year-on-year reduction sales in the first eight weeks of FY22 due to the effects of lockdowns. This contrasts with a 36.1 per cent jump in sales to $210.8 million in FY21.

Investors were undeterred by the more recent sales downturn from Universal Store as shares rose 7.36 per cent to $7.44 this morning, up from a listing price of $3.80 per share in November 2020.

This gives Universal Store a market capitalisation of approximately $545 million - more than five times the $100 million paid by a consortium of three private equity investors to acquire the retailer in September 2018. At that time the group had 53 stores, but that number has since risen to 68 alongside ambitions to lift the count to more than 100.

Meanwhile, net profit after tax (NPAT) was up 90 per cent to $24.4 million in FY21. The company also repaid the net benefit of its JobKeeper subsidies for the financial year - some $3 million - back to the Federal Government.

"In spite of the many challenges encountered during FY21, including store closures in Melbourne from August to October, the results we have delivered are outstanding and well ahead of FY20," says Universal Store CEO Alice Barbery.

"This highlights the ability of our team to operate in what has been an unpredictable trading environment," she says.

"I am very proud of what our team has been able to manage and achieve, including our successful IPO in November 2020. This has undoubtedly been the most challenging and rewarding operating environment our Company has seen in the last decade."

Online sales outpaced group sales at 90.3 per cent to reach $25.8 million, or 12.2 per cent of total sales. The group attributes this surge to significant investments in online capabilities during COVID-19 in FY20, including the implementation of ship-from-store and click & collect. 

"The step of making our full range of inventory available to online shoppers through the launch of ship from store (‘SFS’) was instrumental in driving the ~90 per cent sales growth from our webstore, and a near doubling of the contribution margin from our online channel in FY21," Barbery says.

"Critically, this also delivers increased customer satisfaction, and is a key example of how we can use our stores to support our online channel and vice versa.

"As the online channel becomes a more material component of both our sales and profitability, we will continue to invest in new capabilities and capacity to further drive this channel over the coming years."

The company also expects to open a new distribution centre in the first half of the next financial year, giving it the flexibility to support business growth over the next five to 10 years.

"The focus of our product and operations teams of being ‘close to market and customer’, buying late in season, maintaining collaborative supplier relationships, and micro allocating our stock to store and channel has never been more crucial and valuable than in FY21," the CEO says.

"Our culture and the hustle of our team remain the building blocks of our Company, and they have stood up in extreme circumstances.

"The agility and resilience that these fundamentals give us has been integral to delivering our results."

Barbery highlights the business model is both omni-channel and 'channel agnostic', supporting customers to browse and transact in whichever channel suits them.

"We support both sales channels with a large set of group assets, team and capabilities, which gives us both operating efficiencies and scale advantages," she says.

"This business model is fundamental to our capacity to deliver attractive economics and growth from both the underlying channels and the business as a whole.

"This model is also a key source of differentiation and competitive advantage. The omni-channel customer who shops both our channels is extremely valuable to us and growing strongly in number."

The company, which was founded in 1999 by brothers Greg and Michael Josephson, had net cash reserves of $18.6 million at the end of June.

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