A strong trading update would normally be enough to get investors interested, but that is not how the market is treating Universal Store Holdings Ltd (ASX: UNI) today.
The youth fashion retailer released its FY26 trading update before market open on Tuesday, and the numbers were mostly positive.
Despite this, the share price has gone backwards. At the time of writing, Universal shares are down 3.10% to $7.035.
That leaves the stock down about 12% in 2026, despite the company reporting higher sales and an FY26 earnings guidance above last year's result.
Here's what investors are looking at today.
Image source: Getty Images
Retail sales keep moving higher
Universal reported group retail sales growth of 14% for the first 43 weeks of FY26.
Its core Universal brand lifted total sales by 11.8%, with like-for-like sales up 8.5%.
Perfect Stranger was the strongest performer, with total sales jumping 39.8% and like-for-like sales rising 12.9%. CTC retail sales also grew 14.5%, although like-for-like sales were more modest at 3.8%.
The second-half update also looked solid. Universal said its core brand achieved 8.1% like-for-like sales growth in the first 17 weeks of the second half, while Perfect Stranger delivered 10% growth.
Management also pointed to positive in-store momentum. Online sales have been softer, but the company linked that to reduced discounting and fewer promotional activities.
What management expects for FY26
The company also outlined its expectations for FY26.
Universal expects group sales of $368 million to $375 million, compared with $333.3 million in FY25. Underlying EBITA is expected to land between $61.5 million and $64.5 million, up from $54.6 million last year.
At the mid-point, that implies sales growth of 11.5% and underlying EBITA growth of 15.4%.
The update showed the business is still growing, and management said it has not seen a material shift in sales trends across the group.
But, CTC weighs on the update
The weaker point in the announcement was CTC wholesale.
Universal said deterioration in the CTC wholesale channel continued in the second half, with the closure of key third-party customer stores and reduced intercompany sales weighing on the division.
Management now sees the wholesale channel as structural and unlikely to improve soon. The channel represents less than 5% of group sales, excluding intercompany eliminations.
That said, the company will recognise a $24 million non-cash impairment against CTC intangible assets. This will be excluded from underlying earnings, but it still takes some shine off the update.
Foolish Takeaway
I can see why the market is not giving this a clean pass today.
The retail numbers look good, Perfect Stranger is still growing quickly, and guidance has moved higher. But the CTC impairment gives investors a reason to hit the sell button, especially with the share price already down this year.
From my side, I would want to see whether management can get CTC back on track.
