Universal Store – Sales still firing
About the author:
- Author name:
- By Josephine (Jo) Little
- Job title:
- Former Senior Analyst
- Date posted:
- 28 April 2021, 9:46 AM
- Sectors Covered:
- Consumer Discretionary (Retail)
- UNI provided a strong trading update, reporting 3Q21 total sales +39.6% and LFL sales +37.3% (implies +49% LFL sales growth over the last six weeks).
- As expected, no FY21 guidance was provided, however clearly strong top-line momentum remains strong. We leave our FY21 forecasts largely unchanged at this stage, however note upside risk remains should the current sales trajectory continue over 4Q21.
- We continue to like the UNI story due to the following: longevity of store rollout; strong history of >10% LFL sales growth (excl. COVID); private label opportunity; and favourable store economics (12-14mth payback).
- UNI has seen its PE re-rate (16.9x FY22) to better reflect its strong earnings growth outlook. However, we see upside risk to our FY22 forecasts given our assumptions (flat LFL sales growth + opex deleverage, offset by new store openings) could prove conservative.
3Q trading update – top-line strength continues
UNI provided a strong trading update, reporting 3Q21 total sales +39.6% and LFL sales +37.3% (stores 27.5%; online +148.2%). 3Q21 sales growth was further boosted by softer sales across March last year (initial COVID-19 impacts), before the full store closure period of April/May.
The LFL sales outcome implies that sales accelerated to +49% in the last six weeks of the half (vs +28% for the first 7 weeks of 2H21). No commentary was provided on gross/EBITDA margins, which we take to mean that 1H21 trends have broadly continued in 3Q.
No FY21 guidance provided, as expected
As expected, UNI did not provide FY21 guidance. It did note that LFL sales measures become less meaningful in 4Q21, given the group is cycling a period of national store closures in April/May 2020.
UNI noted that it continues to see customers resume more aspects of their social lives, with CBDs continuing to recover along with a return to domestic tourism.
Mapping out our forecasts
We forecast FY21 EBIT of A$44m (+86% yoy), which implies A$12.4m in the 2H (+143% on the COVID affected pcp).
Our 2H21 forecast in underpinned by: 54% revenue growth (or 23% including the A$15m of lost sales from store closures in 2H20); a steady GM vs 1H21; and CODB of A$37.7m, +44% yoy (or +28% yoy after adjusting for net JobKeeper in the pcp).
We forecast a 3-year EBIT CAGR of ~30%.
Following today's update, we have made negligible changes to our forecasts. We maintain our price target (clients login to view) and Add recommendation.
UNI is still 'young' in terms of brand awareness and store footprint, leaving meaningful upside over time.
We forecast a three-year EPS CAGR of 34% (albeit off a COVID impacted FY20 period).
Based on our forecasts, UNI is trading on 16.9x FY22F PE and 3.4% ff yield.
While a relatively full multiple, we see upside risk to our FY22 forecasts given we model relatively flat LFL sales growth and opex deleverage.
Essentially we think the group can organically fund its strong growth profile, pay out 60-70% in dividends and still generate excess cashflow.
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