The COVID-19 pandemic might have pushed more Australians into the habit of shopping online, but there's still one physical retailer that's looking great for growth.
That's according to Wilson Asset Management portfolio managers Matthew Haupt, Catriona Burns and Oscar Oberg.
In a memo to investors, the trio co-wrote that 3 of Wilson's listed investment companies have held Universal Store Holdings Ltd (ASX: UNI) shares since their initial public offering (IPO) last November.
"Universal Store retails a curated range of third-party branded products, which equated [to] approximately 70% of FY20 revenue, supported by a range of customer-led and complementary private label products," the note said.
"The company reported a record 6 months in its FY21 maiden interim result, with underlying earnings before interest and tax growing 69% to $31.5 million, surpassing guidance given in January 2021 of $30 million to $31 million."
The retailer runs 65 casual clothing stores across Australia and New Zealand. The chain specifically targets the 16 to 35-year-old age bracket.
Universal shares were flat on Friday, closing at the same price as Thursday on $7.11. They started the year at $5.51.
Universal will soar as the COVID-19 vaccine rolls out
The Wilson portfolio managers said they had reduced exposure to e-commerce companies that benefitted last year from pandemic-led consumer habits.
But Universal is still held and remains a favourite.
"We believe retailers leveraged to increasing foot traffic through shopping centres will benefit as the vaccine [rolls out] nationally," the Wilson memo read.
"We are positive on the outlook for growth, as the company has a net cash balance sheet of $22.5 million, with strong opportunities for store network growth and a product range expected to benefit from the return of occasions and triggers for wardrobe renewal as Australia moves toward post-coronavirus normal."
Wilson's flagship investment vehicle WAM Capital Limited (ASX: WAM), as well as WAM Research Limited (ASX: WAX) and WAM Microcap Ltd (ASX: WMI), have been shareholders since Universal's float 5 months ago.
Universal sold for $3.80 during its IPO, so it has already returned 87% for those funds.
Last week, Morgans also rated the retailer's stock as a buy, slapping a price target of $8.37 on it. That would be another tidy 18% return on the current price.
