CTC and Perfect Stranger

As CTC and Perfect Stranger are probably the main sources of future growth, probably interesting to look at these 2 companies into more details.
Once again, these are rather low risks diversifications for UNI as they have worked with both brands (inside Universal stores for some time).

Perfect Stranger
Strong growth for Perfect Stranger which has now 14 stores (vs 80 stores for Universal Store chain).
H1 24 sales : + 60 % (+ 96 % for online sales).
H1 24 Sales : 6.6 m$ (incl 0.7 m$ online) vs 158 m$ for Universal Group.
All stores all already profitable, but the company does not disclose more details regarding its profitability.
Universal Store group has chosen a strategy where it continues to sell Perfect Stranger in its Universal store shops and develop a stand alone chain. So far, they indicate that there is "little to no discernible cannibalisation of nearby Universal Stores".

CTC (mainly Thrill brand)
Unlike Perfect Stranger, UNI did a detailed presentation on CTC when they acquired it in September 2022.
Main elements :
- at the time of acquisition, CTC was doing 22 % of its business with UNI while the sales of CTC were 9 % of UNI FY 22 sales,
- mainly a wholesale business (70 %+ of sales), with some stores (8 stores now),
- high profitability when it was acquired; since then, sales have regularly increased but margin has regularly decreased.
Looking at H1 24, Thrill brand sales have decreased (only due to wholesale business), but it was more than offset by a strong growth of Worship, an emerging brand for them.

Other growing brands at Universal Store chain
If Perfect Stranger remains the main brand in this chain, good to see that there are other brands which are also emerging.
cf comment in H1 24 results : "Performance of Common Need and Neovision (now 9 % of total sales) were very strong".

At this stage, I can only recognize the good job that Universal Store management has done to keep developing new brands and diversified sales formats.
However, I feel that their medium term growth is limited by the cannibalisation risk :
- between sales of Perfect Stranger inside Universal Store chain and in Perfect Stranger stand alone stores (very small for now according to the group, but may limit the growth of Perfect Stranger in the future),
- as well as the cannibalisation of Thrills brand with Worship brand (for CTC).
Not a real surprise that Brett Blundy has decided to keep his stake in Lovisa, but sold his ownership in Universal Store, as he saw the overseas potential of Lovisa, while Universal Store still needs to show his potential out of Australia.

Regarding its potential overseas, Universal Store will probably use the expertise of CTC which has "deep relationships..with third party retail accounts in Australia, NZ and the USA" (US wholesale business represented only 2 % of CTC sales in FY 22).