Universal Store profit up 17pc on productivity gains despite inflationary pressure

Universal Store profit up 17pc on productivity gains despite inflationary pressure

Photo: Universal Store, via Facebook.

Now with 100 stores to its name across several brands, Universal Store (ASX: UNI) has managed to overcome inflationary pressures in its cost base and improve margins, lifting net profit after tax (NPAT) by 16.7 per cent in the December half to $20.7 million.

As group sales rose by 8.5 per cent to $158 million and six new stores were opened during the period across its Perfect Stranger, Universal Store and THRILLS brands, the Brisbane-headquartered company had to contend with a higher cost of doing business (CODB) as a percentage of sales.

In a retail environment of heightened discounting across the market and inflation in the cost of goods, Universal Store was able to lift margins by 80 basis points and keep underlying operational costs in check by optimising store labour and targeting distribution centre productivity. 

The company claims productivity improvements outweighed mandatory award increases and other inflationary pressures, with a $1.3 million cost-out across stores and the distribution centre.

"The results in the half demonstrate our resilience and ability to manage our business as macro-economic conditions fluctuate," says group CEO Alice Barbery.

"Our team has successfully managed margins, inventory, and operating costs to deliver earnings growth in a difficult and subdued consumer spending environment. Our growth ambitions for Universal Store remain unchanged, as does our long-term strategy.

"I am also pleased with the progress we continue to make in developing our emerging retail concepts – Perfect Stranger and THRILLS. These brands and retail formats are continuously improving their offerings and adding the capabilities necessary to successfully scale and deliver attractive financial performance over the years ahead."

With three stores added in the half, the group's Perfect Stranger brand had the highest sales growth in both absolute and like-for-like terms, at 56.5 per cent and 10.3 per cent respectively. This compares to the Universal Store brand's sales growth of 4.5 per cent and only a marginal like-for-like rise of 1 per cent.

Management expects a further one to three Universal Store locations to open in the current half, four to eight new Perfect Stranger sites and one to two new-format THRILLS stores.

As announced on 20 November, chief financial officer (CFO) Renee Jones announced her intent to reduce working hours to better balance her work and parental responsibilities. The company notes today that she will be transitioning to this arrangement in the current half with added finance team support being implemented. 

"The board is also evaluating alternative approaches to ensure the company has the resources and capability it needs to successfully execute its strategy," the company adds.

The CFO's decision did not appear to have any discernible impact on the UNI share price. Since the November announcement, UNI shares had risen 17.9 per cent by the close of trading yesterday, and this morning shares have surged by 11.27 per cent to $4.54.

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