I was very pleased with the Universal Stores 1H26 results today. The highlights of the announcement and CEO Alice Barbery’s comments are included at the end.

Universal Stores has performed better than I was expecting prior to the results with 1H26 NPAT of $28.3 million (Underlying up 22% pcp).

Group new store rollout is on track to achieve previous market guidance of 11 to 17 in FY26. Eight stores opened in H1 FY26 with five stores confirmed for H2 FY26 – four PS and one US store.

The Perfect Stranger stores have been an outstanding success and are contributing strongly to accelerated earnings growth and to improving gross margins. FY26 should see PS revenue 12 times higher than in FY22. With 4 new PS stores planned in Q4 FY26, PS with its outstanding metrics will become a larger contributor to group earnings going forward.

Currently PS contributes only 8% to group sales. However management are focusing on the higher margin labels with 4 out of the 5 stores proposed in Q4 FY26 will be PS.

Looking forward I am now expecting FY26 NPAT to be higher than the current consensus of $40 million. Over the last 4 years (on average) the first half contributed 66% of the earnings, while the second half contributed 34% of the earnings. With group revenue up 13.5% on pcp in first seven weeks of 2H26 and I expect NPAT in 2H FY26 will be similar proportionately to previous years, ie 34% of the full year earnings, or approx $14.6 million. This puts FY26 NPAT in the ball park of $43 million and EPS at 55 cps (up 8% on consensus).

Valuation

Over the l last 5 years UNI has traded on a PE between 10 and 27, with a midpoint of 18. Working on 18 times estimated FY26 EPS of 55 cps, that puts UNI on a valuation of $9.90.

Using McNiven’s Valuation formula assuming equity of $2.10 per share (calculated from 1H26 financial report), ROE of 26.2% (based on FY26 EPS of 55 cps), 30% of earnings reinvested, fully franked dividends and a required annual return of 10% (ROI), I get a valuation of $9.80.

Jarden analysts said today that net profit beat consensus expectations by about 7% and have a price target of $10.69. https://www.fool.com.au/2026/02/19/universal-store-trading-higher-as-profits-beat-expectations/

I’m going to increase my valuation to $10 per share and would be looking to add shares under $8.50 and start lightening off above $11.50 per share

Held IRL (3%)

H1 FY26 Highlights:https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-03058294-2A1654439&v=undefined

• Group sales of $209.6 million, +14.2% versus prior corresponding period (“pcp”):
• Universal Store (“US”) sales of $174.8 million (+11.9% vs pcp), like-for-like (“LFL”) sales +8.7%
• Perfect Stranger (“PS”) sales of $17.8 million (+41.5% vs pcp), LFL sales +14.8%
• CTC sales of $23.2 million (+4.8% vs pcp), DTC LFL sales +9.5%
• Gross profit margins +150 basis points vs pcp, to 62.1%
• Underlying earnings before interest and tax (“EBIT”)2 of $43.6 million, +23.2% vs pcp
• Underlying net profit after tax (“NPAT”) 2 of $28.3 million, +22.0 % vs pcp
• Statutory NPAT of $28.3 million (+150.4% vs pcp)
• Underlying earnings per share (“EPS”) of 36.8 cents per share (“cps”)3, +21.5% vs pcp
• Fully franked interim dividend of 26.0 cps determined, +18.1% vs pcp
• Net cash of $38.4 million as at 31 December 20254
• 118 physical store locations as at 31 December 2025, comprising 87 Universal Stores, 22 Perfect Stranger and 9 THRILLS stores

Commenting on the H1 FY26 results, Group CEO, Alice Barbery said: “The Group delivered a solid first half result, with robust sales growth and gross margin expansion. This growth reflects the team’s continued excellence in providing our customers with on-trend products for their occasions, a service-oriented experience and engaging communication. We note that the youth fashion customer remains discerning, choosing to spend on quality, on-trend clothing from brands they love. The Group continues to focus on cost discipline as we build our team and system capability to support our future growth.

CTC (THRILLS) performance

CTC H1 FY26 total sales of $23.2 million was +4.8% above pcp. This increase was driven by direct to customer (“DTC”) channel growth of +25.5% partially offset by a -2.4% decrease in the wholesale channel.

The Retail strategy is progressing with improvements in store execution, product curation and fast to market mindset. Brand and product positioning has been aligned with historical brand values. The decline in wholesale sales was driven by planned reductions to USA exports due to increased tariffs. Increase in third-party customer sales has offset a reduction in intercompany sales to US. Collectively, the CTC brands

(THRILLS and Worship) represented ~9% of US format sales versus ~12% in pcp.

CTC H1 FY26 gross margin of 46.8% was 150 basis points above pcp due to a higher retail sales mix and improved price management.

One new store opened in H1 FY26 resulting in a CTC network of nine stores as at 31 December 2025, excluding the webstore.

FY26 trading update & outlook: weeks 27 to 34 (H2 FY26 to date)

Group FY26 to date6 DTC sales are up +13.5% on pcp and broken down below:

• US total sales growth of +11.4%, LFL sales +7.1% (cycling +22.5%)
• PS total sales growth of +39.0%, LFL sales +4.9% (cycling +38.8%)
• CTC total sales growth of +14.6%, LFL sales -10.2% (cycling +37.8%)

THRILLS retail stores continued to deliver a strong performance with LFL growth of +18.0%. Online sales were -31.7% with reduced promotional and clearance activity.

Group new store rollout is on track to achieve previous market guidance of 11 to 17 in FY26. Eight stores opened in H1 FY26 with five stores confirmed for H2 FY26 – four PS and one US store. Management continues to pursue additional new store opportunities being prudent to ensure long-term profitability.

Management notes the increase in interest rates and the strengthening AUD/USD exchange rate. The Group maintains a disciplined approach to hedging foreign currency risk and product pricing. Management expects continued volatility in CTC wholesale sales as H2 FY25 USA sales are cycled. The CTC wholesale channel represents less than 5% of Group sales, net of intercompany eliminations.

Recently James Mickleboro from The Motley Fool shared Bell Potter’s view on fashion retailer Universal Stores. https://www.fool.com.au/2024/11/27/buy-bhp-and-these-asx-dividend-shares-now/

“Through its 106 stores across the Universal Store, Perfect Stranger, and Thrills brands, the company is focused on delivering a carefully curated selection of on-trend premium apparel products to 16-35 year-old fashion focused customers.

Bell Potter is bullish on the company's outlook. This is due to its store roll-out and brand growth strategy and potential for margin expansion via its private label product penetration, which currently stands at ~46%.

The broker believes this will underpin fully franked dividends per share of 31.4 cents in FY 2025 and then 36.8 cents in FY 2026. Based on the current Universal Store share price of $7.66, this will mean yields of 4.1% and 4.8%, respectively.

Bell Potter has a buy rating and $8.85 price target on its shares.”

My thoughts on valuation

I thought Universal Stores was undervalued when we added it 12 months ago. I worked on the strategy that it seemed under valued, the growth looked attractive, ROE was strong at 23%, and the dividends (6.3% fully franked at the time) looked attractive. However, I am surprised to see the share price more than double one year later.

In my view Bell Potter is optimistic, but there is reasonable momentum behind the share price, and if it remains on track to achieve $36 million NPAT for FY25 (analyst consensus) then $8.85 could be possible.

My last valuation on the 26 August was $6.50. My valuation (using McNiven’s Formula) required a 12% annual return. That’s a BUY price for me. Working on the current share price of $7.60 I would be expecting an annual return of 10.5%. This is still reasonable value and is a HOLD for me. If it reaches Bell Potter’s target of $8.85, the annual return would come back to 9.3% (assuming future ROE of 24.7%). This is still OK, but given this is a fashion retailer and the fortunes can change quickly, I would be lightening off from $8.50.

Held IRL (2.5%)

From @Jimmy’s DJ Australian Equities Roundup - Market Talk 22 Jul 2024 15:12:47

Universal Store keeps its bull at UBS after the Australian fashion retailer's earnings outlook beat analyst Jarrod Chisholm's expectations. Stronger margins mean that FY 2024 underlying earnings will be about 7% higher than where Chisholm, and the broader market, had thought. Chisholm also notes that sales growth of 9.5% compares very favorably with rival Accent Group's 4.1%. He sees Universal's closure of underperforming Glue stores as a slight positive and keeps a buy rating on the stock despite a 35% rise in value so far this year. Its target price rises 8.3% to A$6.50. Shares are up 0.5% at A$5.78. ([email protected])

Held IRL (1.9%)

Universal Stores just reported another year of growth with underlying EBIT up 15%. I think it’s one of the better retailers to own in the current economic climate. Similar to Lovisa, its customers are a younger fashion conscious demographic.

FY24 Highlights (Unaudited):

• Strong trading performance exiting FY24, with momentum continuing into July 2024

• Group sales are expected to be $288.5 million, up +9.7% on FY23 (FY23: $263.1 million)

- Universal Store LFL sales growth -0.3% in FY24 (H2 +6.6%)

- Perfect Stranger LFL sales growth +7.3% in FY24 (H2 +11.5%)

- Cheap Thrills Cycle (CTC) retail and online LFL sales growth +4.6% in FY24 (H2 +5.6%)

- CTC wholesale sales growth of +5.4% in FY24 (on a proforma basis, excluding intercompany eliminations)

• Underlying EBIT is expected to finalise in the range of $46.0 million to $47.0 million (FY23:$40.4 million)

• FY24 period end net cash of approximately $14.3 million (excludes lease liabilities), and inventory is well balanced and clean; and

• 102 physical store locations as at 30 June 2024, comprising 80 Universal Store sites, 14 Perfect Stranger sites, and 8 THRILLS stores

The strength of sales achieved in H2, particularly in Q4 of FY24, has been pleasing and was driven by enhanced execution rather than favourable macro-economic factors, which continue to pose challenges.

The Group has delivered successive Quarter on Quarter (QoQ) improvements in sales growth as the financial year has progressed, culminating in the strongest quarter, measured in % sales growth vs pcp, in Q4 of FY24.

In the first two weeks of FY25, the Company has seen these positive sales trends continue, with total sales growth in this initial period of FY25 being over +15% (vs. pcp) excluding CTC wholesale channel.

Commenting on the expected FY24 result, Group CEO, Alice Barbery said:

“We’re really pleased to have delivered significant growth in underlying EBIT versus last year, amidst a backdrop of a ‘cost of living crisis’, inflationary pressures and evolving market dynamics. Our team have showcased our resilience and strategic acumen in navigating fluctuating market conditions. These results underscore our commitment to customer led outcomes and operational excellence. We’ve maintained a steadfast focus on managing margins, optimising inventory and controlling costs.”

Held IRL (1.9%)

Universal Stores (UNI) reported a strong 1H24 result today sending the share price up 15%. Sales were up, gross profit margins up, NPAT up 16.7% pcp, net cash of $27 million, 6 new stores opened (3 Perfect Stranger which are doing exceptionally well). Nice fully franked dividend declared yielding 3.5% (5% including franking credits) for this half only! :) They generally plough back c.30% of their earnings back into growth and that’s likely to be on a ROE upwards of 20%.

I tuned into the end of the webinar during question time (following the Lovisa call) and I was blown away by the enthusiasm of these two young women leading the Universal team. They really have their heads around the business, their passion and smiles were infectious, and the business culture at Universal seems to be really positive. I am pleased I invested when the market was negative on their prospects.

CEO Alice Barberry, and CFO Renee Jones at the results webinar this morning (22/02/2024)

Commenting on the results, Alice said:

“The results in the half demonstrate our resilience and ability to manage our business as macro-economic conditions fluctuate. 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."

Here are the highlights from the Announcement:

• Group sales of $158.0 million, +8.5% versus prior corresponding period (“pcp”), primarily reflecting added CTC contribution

- Universal Store (US) sales of $133.2m (-1.4% vs pcp), LFL sales -5.4%2

- Perfect Stranger sales of $6.6 million (+59.7% vs pcp)

- CTC sales of $25.3m (+4.2% proforma vs pcp)

• Gross profit margins +80 basis points versus pcp, to 59.7%

• Underlying EBIT of $30.8 million, +8.1% versus pcp4

• Statutory net profit after tax (“NPAT”) of $20.7 million (+16.7% versus pcp)

• Adjusted earnings per share (“EPS”) of 26.6 cents per share (“cps”)

• Net cash of $27.4 million as at 31 December 2023

• 6 new stores opened during H1 FY24; 3 Perfect Stranger (“PS”), 2 Universal Stores (“US”) & 1 THRILLS store, bringing total Group stores to 100 (excl. webstores)

• Interim FY24 dividend of 16.5cps declared (up from 14.0cps in prior year).

-ENDS-

More later with another crack at the valuation.

Disc: Held IRL (1.2%)

Full ASX announcement  MACQUARIE CONFERENCE & TRADING UPDATE

Going straight to the guidance:

• We anticipate FY22 sales to be between $205m and $207m ($210.8m in FY21) and underlying EBIT to be between $30m and $31m ($44.0m in FY21)

• We expect to finish FY22 with inventory in line with plan with aged inventory at historical levels

• We expect ‘net cash’ in excess of $20M

Disc: not held.

Interested to see how retailers are faring in general given the turbulent H2. Looks like EBIT for UNI will be down over 30% on FY21.