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Why the Shaver Shop Group Ltd share price went gangbusters today

Much to the relief of its shareholders, the Shaver Shop Group Ltd (ASX: SSG) share price is finally moving in the right direction at long last.

In early trade the specialist grooming products retailer’s shares are up 17% to 70 cents.

Today’s gain is the result of a positive third quarter trading update and an increase to its full-year guidance.

After a disastrous start to 2017 the company’s performance improved greatly in March, leading to positive total same store sales growth for the quarter.

As a result Shaver Shop’s same store sales year-to-date are now in positive territory, up 1.3% on the prior corresponding period.

The improved performance has given management the confidence to upgrade its full-year EBITDA guidance to between $13.7 million and $15 million, compared to prior guidance of between $12 million and $13.5 million.

According to the release the recent sales uplift comes from daigou sellers who buy products for resale to consumers in Asian markets.

Management is closely monitoring the daigou opportunity, but is sensibly remaining cautious due to the channel’s unpredictable nature.

Should you invest?

Whilst this update was extremely positive and I can’t say I’m surprised to see its shares rocket, I wouldn’t be in a rush to invest.

Like fellow retailers JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN), I think Shaver Shop would be negatively impacted by the highly anticipated arrival of Amazon on Australian shores.

I would expect Amazon to undercut Shaver Shop’s prices, leaving management little option but to cut its own prices to compete. This is likely to impact its overall profitability and slow its growth.

So for now I would suggest investors skip Shaver Shop and focus on high quality growth shares like these.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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