For the first twenty weeks of FY24, Aussie fashion retail company Universal Stores (ASX: UNI) has had to place its focus on promotions and discounts to cater to increasingly price-conscious consumers.

Universal saw a spending decline in the regional areas of eastern Australia, contrasting with the more robust performance in metropolitan and CBD locations. In response, Universal Store has taken proactive steps to refine its product offerings in these markets, emphasising the preferences of price-conscious customers. It is doing so through promotional discounting.

Overall, it saw a sales growth of 14.7% on PCP to $88.4 million. This also reflects the results of the Company’s Cheap Thrills Cycle (CTC), aka THRILLS, acquisition in October 2022. Its underlying gross margins stood at 59%, in line with PCP.

Group CEO, Alice Barbery said: “I’m once again gratified by the exceptional response of our entire team as we navigate the current trading environment. We have diligently executed a multitude of cost‐saving and efficiency‐improvement initiatives while maintaining a relentless focus on meeting the evolving needs of our customers. 

“We remain committed and confident in our long‐term strategy.” 

In FY23, Universal Stores evolved from a single business operator to operating three brands: its standalone Perfect Stranger brand and clothing brands THRILLS and Worship, subsidiaries of CTC.

As of October 2023, Universal’s cost of doing business was slightly lower, and underlying EBIT was ahead of PCP by approximately $2 million.

The Company has not been exempt from inflationary pressures, with Aussies spending over 3% less on clothing than last year. In the Northern Territory specifically, household spending on clothing and footwear saw an 8.7% decline.

For Universal, the transformed spending habits have urged changes. The Company is launching new stores, with five new stores already opened in FY24 YTD, comprising two new Universal Store locations, plus three new Perfect Stranger sites. Two more store locations are expected to open pre‐Christmas (one Perfect Stranger and one new‐format THRILLS store).

Besides opening new stores, Universal is also selectively investing in re‐fitting and refurbishing certain key sites, and where conditions permit, it is relocating and upsizing certain stores. Plus, it is closing a few existing legacy THRILLS stores that it feels are “misaligned” with its long-term vision for CTC. 

This could also be construed as a cost management bid.

In FY23, though its cash flow remained positive, Universal saw declining traffic to its store, compelling it to improve its online strategy. Furthermore, Universal is optimising store labour (although the Company didn’t specify what this entailed) and enhancing targeted distribution centre productivity. 

The CTC acquisitions have been adding to earnings, with total retail channel sales up 2.6% on PCP. That said, Universal’s like-for-like sales are down 6.4%, slightly improving to a decline of 4.4% between October and November.

With Black Friday approaching, Universal’s discounts and promotions might bear fruit as Aussies look to shop for the upcoming holiday season. The Company says its inventory is well-managed, and it is ensuring that the stock remains fresh and appealing to consumers.

By December 31, 2023, Universal expects to have 100 stores and expects to grow to about 104‐107 stores by 30 June 2024 to serve more customers across Australia.