SYDNEY - As Australian retail companies gear up for growth, two small-cap players, Universal Store Holdings Ltd and Step One Clothing Ltd, stand out with their ambitious expansion and profitability strategies. These firms are not just aiming to increase their physical and online presence but are also projecting significant dividends that are catching the eyes of investors.
Universal Store Holdings Ltd (ASX:UNI), known for its trendy youth fashion, is actively expanding its footprint across Australia. The company, which oversees brands like Worship, has disclosed plans to grow its earnings by opening more outlets in the fiscal year 2024 (FY24). With a current portfolio of 95 stores, the retailer is looking to increase this number significantly. In line with this growth trajectory, Universal Store Holdings has forecasted a dividend of 25.9 cents per share for FY25, which is expected to deliver an impressive yield of around 11%.
On the other hand, Step One Clothing Ltd (ASX:STP), which specializes in innerwear and operates predominantly online, is adopting a strategy that emphasizes profit over revenue. This approach has led to strong financial results for the company. Step One Clothing is not only focusing on enhancing customer experience but also exploring new markets in FY25. The retailer's forward-looking stance is reflected in its projected dividend per share of 5.9 cents, translating to a potential yield of approximately 11.6%.
Both companies have managed to maintain a positive outlook despite the uncertainties looming over the retail sector. They are leveraging favorable price-to-earnings (P/E) ratios and payout ratios to promise substantial dividends to their shareholders. For instance, Step One Clothing reported robust earnings growth in the past fiscal year with earnings before interest, taxes, depreciation, and amortization (EBITDA) reaching $12 million and net profit after tax (NPAT) up to $8.6 million.
These strategic moves by Universal Store Holdings and Step One Clothing indicate a broader trend among retail firms that are navigating through market challenges while still aiming to reward investors with attractive returns. As they continue to expand and adapt their business models, these companies are setting themselves up as ones to watch in the upcoming fiscal years.
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