Universal Store is facing a one third drop in its underlying earnings for 2022

The fashion retailer is facing sliding earnings and sales but is pleased with sales momentum given lockdowns and rising inflation.

Universal Store CEO Alice Barbery in her store in Chermside. The retailer has provided a trading update showing sliding underlying earnings for 2022 and weaker sales. Picture: NCA NewsWire / John Gass

Fashion chain retailer Universal Store is facing a one third slide in its full-year earnings but remains pleased with its sales momentum in the face of rising interest rates and soaring inflation currently running through the Australian economy.

Investors are bracing for a string of trading updates from the market’s listed retailers that will throw a spotlight on the impact to tightening interest rates and the elevated cost of living on the performance of discretionary retailers which are heavily exposed to tight household budgets.

In a presentation to a Macquarie conference, Universal Store chief executive Alice Barbery said the retailer, which has 78 clothing stores as well as an online store, is expecting its underlying earnings to fall in 2022 with revenue for the year also slightly down.

Its underlying earnings for fiscal 2022 are expected to drop by as much as one third.

Universal Store said it is anticipating sales for 2022 to be between $205m and $207m, against sales of $210.8m in 2021, and its underlying EBIT to be between $30m and $31m against earnings of $44m in 2021.

When the market opened on Wednesday, shares in Universal Store fell 4.3 per cent to $3.30.

In a trading update delivered by the retailer at a Macquarie conference, Universal Store said total sales growth for the second half was 6.9 per cent with online sales growth of 27.3 per cent for the June half.

It said despite around 25 per cent of trading days being lost in the first half resulting in first half sales being down 8.2 per cent. Universal Store’s year to date sales are now down just 2.3 per cent on 2021, aided by growth in second half sales and successful new store openings, the retailer said.

Year to date like for like sales, including online, are down 2.8 per cent.

“We are pleased with the sales momentum we are delivering in the second half, including in our most recent trading results as interest rate increases and other increases in costs of living have become more apparent in the market,” the retailer said in its Macquarie presentation.

“As previously flagged, we have continued to invest in our people, new office and distribution centre projects, as well as improved technology – all necessary investments for scale and continued growth.

“We are mindful of the ‘cost of doing business’ challenges across supply and service chains impacting the retail sector.”

In terms of its supply chains, it said it was experiencing some delayed delivery of third party brands.

The company said it expected to finish 2022 with inventory in line with plan and net cash of more than $20m.

Originally published as Universal Store is facing a one third drop in its underlying earnings for 2022