Why did the Universal Store (ASX:UNI) share price surge 7% today?

Shares in the retailer were soaring today.

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Key points

  • The Universal Store share price traded as high as 8% today
  • The retailer has repeated an 8.2% drop in sales for H1 FY22
  • The Universal share price has increased by 20% in 12 months

The Universal Store Holdings Ltd (ASX: UNI) share price surged today, jumping as high as 8% after the fashion retailer released a trading update. At the time of market close, the Universal Store share price was up 7% at $6.85 apiece.

But even though its share price was up, its sales revenue was not.

The retailer aims at customers between the ages of 16-35 with 76 fashion stores across Australia as well as an online presence. Let’s take a closer look at its news today.

Universal sales down

In today’s announcement, Universal Store released its expected unaudited financial results for the first half of FY22.

The company advised it expected overall sales for the 6 months ending 31 December 2021 to be down 8.2% to $108.3 million. Online sales generated $20.9 million and contributed to almost 20% of sales for the company.

The retailer said it lost 25.5% of potential trading days due to the Australian coronavirus lockdowns.

As such, the company reported a 0.6% increase in gross profit margin (excluding delivery costs for online sales) against the prior corresponding period, despite markdowns of merchandise due to store closures.

Freight costs associated with online sales has also affected the net gross profit margin.

Universal Store was happy with the growth of its online presence, despite its sales growth seeing half the traffic it had in the previous corresponding period.

While its trading operations were affected by the pandemic, Universal Store said it had not experienced disruption to its shipping or imported container supply.

Overall, Universal Store expects its underlying earnings before tax to fall between $19 million to $19.5 million. It expects its net cash for this quarter to be $33.7 million, entailing $48.8 million cash and $15.1 million of bank debt.

Universal Store said it was “satisfied with the overall result” of the figures. The company will release its results for H1 FY22 on 23 February.

Universal store share price snapshot

Over the last 12 months, the Universal Store share price has lifted almost 20%, but only 1% this year to date.

The fashion retailer saw its share price hit a 52-week-high of $8.34 in November last year before it reversed direction with steep drops and rebounds through the December period. Having said that, analysts at the Swiss investment bank, UBS, considered the stock a buy last month due to expansion opportunities and product pricing.

The company currently has a market capitalisation of $501 million and a price-to-earnings ratio (P/E) of 17.2.

Should you invest $1,000 in Universal Store right now?

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Motley Fool contributor Alice de Bruin has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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