The ASX small-cap share Universal Store Holdings Ltd (ASX: UNI) looks like one of the best ideas to own for the next five years, in my view.
Some businesses involved in technology face elevated uncertainty amid the rapid advancement of AI. Some tech companies may be able to survive and thrive, while others could face difficulties.
ASX shares from non-tech sectors could have stronger economic moats in this new era.
Universal Store is a clothing retailer of premium youth fashion apparel products aimed at 16 to 35-year-olds. Its two key retail banners are Universal Store and Perfect Stranger. The ASX small-cap share also owns CTC (which trades as the THRILLS and Worship brands).
Let's run through what makes Universal Store such an appealing buy.
Image source: Getty Images
Store rollout continues
A key driver of the company's success is its ongoing expansion of the store network across its various brands. Growing its store count allows it to reach more customers and hopefully unlock scale benefits.
At the latest count, the business operates 128 physical stores in Australia, in addition to its online channels.
The company said in its annual general meeting (AGM) that it's on track to open 16 to 20 new stores in FY27. Five stores have already opened, and it's on course to open another seven stores before Christmas. In addition, one Universal Store will reopen in November after being temporarily closed in FY26.
Impressive revenue growth
For a business to deliver significant returns, it typically requires a solid top-line growth rate to drive net profit to a much larger figure in the coming years.
The business reported in its recent trading update that, in the first 17 weeks of FY27, to 25 October 2026, total direct-to-customer sales grew by 9.3%. I think that's a solid growth rate considering the difficult economic conditions.
Within that overall figure, it said that Universal Store total sales grew 6.6% with like-for-like sales growth of 2.8%. Perfect Stranger total sales grew 36.8% with LFL sales growth of 11.6%. CTC total sales grew 2.9% with an LFL decline of 0.7%.
The LFL sales growth figure reflects performance from existing stores, while total sales includes both new stores and existing store performance.
That growth rate comes after the company reported total sales growth of 12.9% in FY26, so the ASX small-cap share continues to do well.
Rising profit margins
Another element that helps drive the best long-term winners is rising profit margins. Investors usually value a profitable business on how much its earnings are growing. When profit can rise even faster than revenue, you can see great results.
In the AGM update, the company said that the growth of Perfect Stranger continues to provide a gross profit margin mix benefit to the group.
Its operating leverage was clear in the FY26 numbers, and I expect the rising profit margins trends to continue.
In FY26, the ASX small-cap share's revenue grew 12.9%, the gross profit margin increased 140 basis points (1.40%) to 62.5%, the underlying operating profit (EBIT) grew 17.2%, and underlying net profit rose 16.3%. Each of those margins improved.
According to the forecast on CMC Invest, the Universal Store share price is valued at 14 times FY27's estimated earnings, which I think is a great valuation to buy.
