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Vita Group Limited (ASX:VTG) shares rocket higher on half year guidance update

There have been a lot of strong performers on the market on Friday, but few come close to matching the Vita Group Limited (ASX: VTG) share price gain.

In late morning trade the retailer’s shares are up a remarkable 25% to $1.09.

Why are Vita Group’s shares on fire today?

This morning the Telstra Corporation Ltd (ASX: TLS) store operator released a trading update and its first half guidance to the market ahead of its annual general meeting.

According to the release, the company has had a strong start to FY 2019 and all its businesses are performing well.

Vita Group chief executive officer, Maxine Horne, stated that: “We are enjoying solid momentum across all of our businesses as a result of our rigorous focus on providing great advice and service to our customers, focusing on productivity and keeping costs down.”

As a result, Horne is “confident in our ability to deliver a strong result for the first half of FY19.”

She has provided half-year guidance of earnings before interest, tax, depreciation and amortisation (EBITDA) of around $23 million to $24.5 million for the six months to December 31. This represents a 15% to 23% increase on the prior corresponding period.

Earnings before interest and tax (EBIT) is expected to be around $18 million to $19.4 million, up 15% to 24% on the prior corresponding period.

This guidance is subject to the balance of trade through to the end of December, final accounting adjustments, and the auditor review.

Should you invest?

I thought this was a surprisingly good update from Vita Group and, judging by the share price reaction, the market appears to think so too.

While I’m not ready to make an investment just yet, I’ll certainly be looking out for its first-half results when they are released early next year.

In the meantime, I’m looking at beaten down retailers such as Adairs Ltd (ASX: ADH) and Super Retail Group Ltd (ASX: SUL).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Super Retail Group Limited. 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 Scott Phillips.

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