Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Universal Store Holdings Ltd (ASX:UNI) reported a 16.1% increase in group sales, reaching $183.5 million.
• The company maintained a robust gross margin of 60.6%, up 90 basis points, despite market-wide discounting.
• Perfect Stranger brand saw significant growth, with like-for-like sales up 25.3% and expansion to 16 stores.
• The company has a strong balance sheet with a closing cash balance of $37.7 million and no borrowings.
• Universal Store Holdings Ltd (ASX:UNI) announced a fully franked dividend of $0.22, a 33% increase from the prior period.

Negative Points

• CTC wholesale sales declined by 16.4% due to subdued market conditions.
• The company booked a $13.6 million impairment charge against the carrying value of CTC Goodwill.
• Cost of doing business increased by 170 basis points to 30.9% due to cost inflation and investment in team capability.
• Online sales growth lagged behind retail sales, indicating potential challenges in the digital channel.
• The competitive environment remains challenging with continued discounting from peers affecting market dynamics.

Q & A Highlights

• Warning! GuruFocus has detected 9 Warning Signs with WHITF.

Q: What's the path to further increase private brand share, and how do you balance gross margin optimization versus meeting customer needs? A: The private brand strategy is customer-led, not a margin grab. We continue to expand based on customer demand, such as with Neovision, which has expanded into women's wear. We also look for gaps in the market that third-party brands can fill. Private brands offer differentiation, shielding us from markdown activities. The focus remains on meeting customer needs rather than just expanding private brands. - Alice Barberry, CEO

Q: Where are you in terms of optimizing the Thrills store network and shifting to a growth phase within that business? A: We've onboarded new leadership, including a CEO and head of product, to improve responsiveness and market behavior. While the wholesale market remains challenging, we are seeing positive direct-to-consumer like-for-like sales. The focus is on retail execution and stabilizing wholesale operations. - Alice Barberry, CEO

Q: Could you talk about whether you've benefited from any store closures during the period, or is it just execution? A: We believe we are winning in the marketplace through excellent execution. Youth customers value peer recognition, and trends on platforms like TikTok can drive sales. Our success is attributed to being close to market trends and having a strong product team. - Alice Barberry, CEO

Q: Is there anything that you need to see to have the confidence to make Neovision a standalone brand similar to Perfect Stranger? A: Neovision is already aligned with the Universal Store customer, unlike Perfect Stranger, which attracted a different customer base. We don't see a standalone store as necessary for Neovision, but we are exploring other growth strategies, particularly online. - Alice Barberry, CEO

Q: How do you view the strength in your customer base as a forward read on the consumer, or is it due to actions taken by your team? A: The youth market is not heavily impacted by unemployment but was initially affected by rising rental prices. They've adjusted their spending habits but continue to prioritize on-trend products for important occasions. Our strong product offerings meet these needs. - Alice Barberry, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.