The Universal Store Holdings Ltd (ASX: UNI) share price has continued its incredible run on Tuesday.
In early afternoon trade, the fashion retailer’s shares are up 8.5% to a record high of $7.64.
This means the Universal Store share price is now up 38% year to date and 100% from its November IPO listing price of $3.80.
Why is the Universal Store share price rocketing higher?
Investors have been buying the company’s shares since its listing due to its exceptionally strong performance during the first half of FY 2021.
For the six months ended 31 December, Universal Store reported a 23.3% increase in sales to $118 million and a 63.6% increase in underlying net profit after tax to $21.1 million.
This was driven by like for like store sales growth of 19.1% and a 128.3% jump in online sales, which offset store closures in Melbourne between August and October.
Why are its shares charging higher today?
The catalyst for the rise in the Universal Store share price today was the release of a trading update this morning.
Pleasingly, that update reveals that its performance has strengthened since the end of the first half.
According to the release, the company has experienced excellent sales performance across its stores and online business, with third quarter headline sales growth of 39.6% and comparative growth of 37.3%.
This comprises like for like store sales growth of 27.5% and online sales growth of 148.2%.
What about the fourth quarter?
Looking ahead, the company notes that it is now cycling a period where its comparative sales measure becomes less meaningful.
This is because this time last year there were national store closures at the height of the pandemic.
Furthermore, although all stores had reopened by 11 May 2020 (at reduced trading hours), foot traffic remained depressed especially in CBD stores and tourist areas.
As a result, sales growth will be extremely strong in the fourth quarter compared to the prior corresponding period, but investors shouldn’t extrapolate this over the remainder of the calendar year.
Is the Universal Store share price in the buy zone?
Despite the Universal Store share price doubling in value since its IPO, one broker believes that its shares can go higher.
According to a note out of Morgans, its analysts have an add rating and $8.37 price target on the company’s shares.
The broker believes Universal Store can grow its earnings by a CAGR of 34% over the next three years.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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