The ASX dividend share Universal Store Holdings Ltd (ASX: UNI) is still trading 31% lower than its November 2021 high, as shown in the chart below. However, I think it's an attractive long-term investment.
The ASX retail share owns youth fashion brands with retail and wholesale businesses. Its strategy is to grow and develop its premium youth apparel brands and retail formats to "deliver a carefully curated selection of on-trend apparel products to target 16-35-old fashion-focused customers."
Universal Store recently announced a trading update and guidance for FY24, which made me even more optimistic about the ASX dividend share.
Strong update
Excitingly, Universal Store said it had a strong trading performance exiting FY24, with momentum continuing into July 2024.
The retailer expects group sales to be $288.5 million for FY24, up 9.7% year over year. Universal Store like-for-like (LFL) sales growth in the second half of FY24 was up 6.6%, while Perfect Stranger LFL sales rose 11.5% in the second half.
The ASX dividend share also expects underlying earnings before interest and tax (EBIT) to be between $46 million and $47 million, up from $40.4 million in FY23. This would represent year-over-year growth of 14% to 16%.
Universal Store advised that it finished FY24 with net cash of approximately $14 million, excluding lease liabilities. The inventory was "well balanced and clean", and the balance sheet was in good shape.
Those positive sales trends continued in the first two weeks of FY25, with total sales growth in the initial period of FY25 being 15% year over year, excluding the CTC wholesale channel.
Why I think the ASX dividend share is a good buy
Not only did the company manage to deliver growth, but it accelerated during the year, with the fourth quarter of FY24 being the best period of growth in percentage terms, year over year. That's a promising sign, and the company attributed this performance to "enhanced execution" rather than the economic recovery.
Another positive sign was that the company's profit margin increased. The business is expecting underlying EBIT to increase by at least 14%, while sales increased by 9.7%. Operating leverage is a strong sign to me of a good future because investors usually value a business based on profit. And the profit pays for the dividend.
Universal Store has grown its annual dividend each year since 2021, when it started paying a dividend. Its last two dividends amount to a fully franked dividend yield of 4.25% and a grossed-up dividend yield of 6.1%.
I think that's an appealing starting dividend yield, and I'm expecting ongoing dividend growth in the next few years.
