Shaver Shop Group Limited (SSG) is an Australian specialty retailer of personal grooming and beauty appliances in Australia and New Zealand. Through a network of more than 120 stores and online sales capability, it delivers customer service excellence across every channel that customers choose to engage in. Like its retail peers, SSG is cycling strong trading results in 1Q24 (+17.5% growth in 1Q23), as such year-to-date sales are 5.1% lower than the pcp. Difficult trading conditions are likely to persist for some time yet, which combined with higher labour and occupancy costs, will see a short-term profit squeeze. We have downgraded our FY24/FY25 earnings by 15%/14% and maintain our Hold rating. SSG reported an FY23 NPAT of $16.8m, up 0.8% on the pcp but 4.0% below our forecast of $17.5m.
Sales declined 3.1% in the second-half of FY23. While in-store sales increased they were partly offset by the decline in Online sales. SSG maintains a strong market position in the personal care segment, generating high returns on capital. The company has largely built out its network of stores in Australia, although there remains scope for infill stores and expansion in NZ. We expect 1-2 store openings per year and 5-6 store refurbishments to drive sales. While the company has recorded exceptional growth in both sales and gross profit in recent periods, given an expected decline in sales in 1H24, we are cautious about the outlook. We maintain a Hold rating with a price target of $1.05 (from $1.25).