Shares in ASX small-cap stock Universal Store Holdings Ltd (ASX: UNI) have seen significant growth over the last year, rising by close to 90%. However, at a current share price of around $7.70, I believe the ASX retail share still has a lot of promise.

Retail can be a difficult sector for some companies to succeed in because of competition, but Universal Store appears to be executing its growth plans very well.

The company, which sells premium youth fashion apparel targeted at 16-35-year-olds through multiple brands, is best known for its Universal Store network. It also has the CTC (trading as the THRILLS and Worship brands), and it's also rolling out the Perfect Stranger brand as a separate retail business.

At the last count, it had 106 physical stores across Australia.

Strong revenue growth

I think this ASX small-cap stock's revenue growth stands out at a time when economic conditions are quite tough for some Australian households. Considering revenue is a key factor for profit growth, there are some good signs for the company, with both its like-for-like (LFL) sales and expanding store network.

In the first 17 weeks of FY25, direct-to-customer sales were up 19.3%. Within that, Universal Store total sales were up 15.5%, LFL sales were up 13.8%, Perfect Stranger total sales grew 111.1%, and LFL sales increased 29.9%.

The company advised its store roll-out was on track to achieve nine to 15 new stores in FY25. Universal Store opened three stores in the first 17 weeks of FY25 and a further four stores before Christmas.

With Perfect Stranger's rapid growth, I think the ASX small-cap stock has a very promising outlook for the foreseeable future. A national store rollout with Perfect Stranger seems like an exciting plan.

Rising profit margins

The company's profit margins could continue rising, in my view. Cost inflation is a headwind for the business, but I think it's growing so well that its profit margins can continue rising. A growing margin helps net profit after tax (NPAT) grow even faster than revenue.

Universal Store's FY24 result demonstrated its capabilities of delivering operating leverage. While revenue increased 9.7%, underlying operating profit (EBIT) increased 16.6% to $47.1 million, and statutory net profit after tax (NPAT) increased 45.3% to $34.3 million.

In five years, I believe the company's underlying EBIT margin could be noticeably higher, helping it earn even stronger returns.

Solid dividend yield

Owning this ASX small-cap stock can bring pleasing dividend income — it's a rewarding ASX dividend share to hold.

In FY24, Universal Store paid an annual dividend per share of 35.5 cents. At the current Universal Store share price, this trailing dividend translates into a grossed-up dividend yield of 6.6%, including franking credits.

While I believe capital growth could account for a greater part of the overall returns in the coming years, the dividend is a useful bonus.