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Why investors are trimming the Shaver Shop (ASX:SSG) share price

The Shaver Shop Group Ltd (ASX:SSG) share price is being trimmed by investors. It's down by around 11% in reaction to FY21 guidance.

The Shaver Shop Group Ltd (ASX: SSG) share price is being trimmed by investors. It’s down by around 11% in reaction to an update from the retailer.

Shaver Shop was founded in 1986, it now has over 120 stores across Australia and New Zealand. It’s a speciality retailer of male and female personal grooming products and aspires to be the market leader in ‘all things related to hair removal’. It sells products across oral care, hair care, massage, air treatment, and beauty categories. The majority of Shaver Shop’s clients are females, purchasing for both themselves and others.

The company says it takes all possible steps to ensure customers have the “widest range of grooming solutions at rock bottom prices.”

The cause of the Shaver Shop share price drop

The retailer has provided an update about its FY21 outlook. The Shaver Shop board said it was pleased with the underlying trading performance of the business with customer service metrics remaining strong.

Based on unaudited management accounts through May 2021 and the trading performance through to mid-June 2021.

In FY21, total sales are expected to be in a range of $211 million to $213 million. Net profit after tax (NPAT) is expected to be in a range of between $16.75 million to $17.5 million.

The company is expected to finish with net cash (no debt) at 30 June 2021 of $6 million to $8 million.

How does this guidance stack up?

This FY21 guidance should be taken in context of how things went in the first half and in FY20. HY21 saw total sales of $123.6 million (up 15%) and net profit after tax of $14.2 million (up 85.5%).

FY20 saw total sales of $194.9 million (up 16.4%) and net profit of $10.6 million (up 44.6%).

That means that management are expecting Shaver Shop’s FY21 total sales to increase by at least 8.25% and net profit to go up between 58% and 65%.

I think that’s a very solid growth level, but it appears not quite as much as some investors were expecting or hoping.

Shaver Shop is doing well, but I don’t know if this booming profit can continue or whether it’s a short-term retail boost. There are other ASX growth shares I’ve got my eyes on.

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