The prospect of record sales and material growth from one All Ordinaries Index (ASX: XAO) company hasn’t proven enough to win over the market this morning.
All Ords stock Universal Store Holdings Ltd (ASX: UNI) is plummeting on the back of what initially appears to be a positive update.
However, investors seem to have honed in on a notable ‘but’ in today’s update from the youth-focused clothing retailer. That is, a deteriorating macro environment and financial pressure on its key demographic.
The All Ords share is trading 29% lower at $2.94 at the time of writing.
Let’s take a closer look at the news weighing on Universal Store shares on Wednesday.
All Ords retail share tumbles amid deteriorating environment
Experts have previously heralded youth-focused retailers as somewhat immune to the economic pressures broadly felt by consumers in 2023.
QVG Capital’s Josh Clark, for instance, flagged that younger Australians are generally positioned to benefit from low employment while avoiding the impact of rising rates, as my Fool colleague Tristan reported earlier this month.
Thus, the demographic may have been assumed to have plenty of cash for discretionary purchases. But such hopes might have gone out the window today. Universal Store’s latest trading update stated:
Trading conditions observed throughout April and May to date have further tightened indicating that some customers are reducing their spending.
The group expects this subdued environment to continue for the balance of FY23 and into FY24.
Fortunately, that’s about where the bad news ends. Though, that’s likely little comfort for those watching the All Ords stock tumble today.
Universal Store bolsters guidance, forecasts record sales
In more positive news, the company expects to post a record $258 million to $261 million of sales for financial year 2023. That would mark an increase of as much as 25% on its previous result.
Between $238 million and $240 million of that is tipped to come from the Universal Store business. Another $40 million to $42 million is expected to be born from its recently-acquired THRILLS business.
In earnings, the All Ords company expects to post between $39 million and $41 million of earnings before interest and tax (EBIT) – up from $32.6 million in financial year 2022.
Meanwhile, its gross margin is expected to come in slightly above last fiscal year’s 61.1%. That’s particularly impressive, given the company noted a backdrop of increased promotional activity and evidence of overstocking among its peers.
Today’s release from the All Ords company concluded:
The group will continue to make the right long-term decisions despite the challenges of near-term sales volatility and a difficult macro environment.
It’s expected to drop its full-year earnings on 25 August.
Universal Store share price snapshot
Today’s tumble has sent the Universal Store share price further into the longer-term red.
The stock has fallen 42% since the start of 2023. It’s also 34% lower than it was this time last year.
Meanwhile, the All Ords has risen 4% year to date and 1% over the last 12 months.
