Lovisa Holdings Limited 

LOV Details

Revenue Driven by Strong Growth in Store Numbers: Lovisa Holdings Limited (ASX: LOV) is engaged in the retail sale of fashion jewellery and accessories.

FY19 Financial Highlights: During the year ended 30 June 2019, the company reported revenue amounting to $250.3 million, up 15.3% on prior corresponding period revenue of $217.0 million. EBIT for the period amounted to $52.5 million, up 2.8% on pcp value of $51.1 million. NPAT for the year amounted to $37.0 million, rising 3.0% on prior corresponding period NPAT of $36.0 million. Comparable sales for the period went down by 0.5% on prior year due to the impact of challenging trading conditions, particularly during the first half of FY19.


FY19 Result Highlights (Source: Company Reports)

Performance on the Store Front: FY19 saw the opening of 70 new stores, closure of 6 stores and 12 relocations. Overall, the period was marked by a net increase of 64 stores to the company’s network. Based on the market-wise statistics, the USA reported the highest increase in store numbers from 1 store in FY18 to 19 stores in FY19. This was followed by an increase of 14 stores in the UK and 10 stores in the middle east.The above stated performance across the store network led to a top-line growth of 15.3% in FY19 that was offset by a decline in comparable store sales in the first half of the year.


Store Growth in FY19 (Source: Company Reports)

Sales Performance: With the accelerated growth in new stores, particularly in the USA and Europe, the company reported remarkable sales growth in the two regions during FY19. While sales in the USA stood at $6.35 million, representing an increase of 1,146.8% on prior corresponding period, European sales witnessed an increase of 105.1% on pcp, at $36.67 million. At the end of the year, the company had 19 stores operating in the USA and has further opened 9 new stores after stepping into the next financial year. Performance in the region has been in-line with the company’s expectations with store metrics and range performance, delivering the required results. Global sales revenue for the year stood at $250.3 million, up 15.3% on prior corresponding period. Although comparable sales went weak in the first-half with a reported decline of 1.8% over pcp, the company picked up pace in the second-half with an improvement in comparable store sales across most markets.


Sales Performance (Source: Company Reports)

Trading Update & Outlook: As per the trading update provided in FY19 results presentation, the company reported positive comparable store sales growth since the end of the financial year, factually stating growth within the target range of 3% - 5%. Since the end of the year, the company has rolled out 14 new stores with total store number in the network, now standing at 404. In FY20, the company will continue expanding its store network and is expecting a higher number of new store rollouts than FY19.

Stock Recommendation: Over a period of 6 months, the stock of the company generated returns of 29.21% and is currently trading at close to its 52-week high level of $13.430. Currently, the company has a price to earnings multiple of 35.68x, which is higher than the industry median of 12.4x. EV/EBITDA multiple for the stock stands at 20.2x as compared to the industry median of 7.6x on TTM (Trailing Twelve Months) basis. Based on the current trading levels and stretched valuations, it can be presumed that most of the positive developments have been discounted at the current juncture. Hence, we recommend a “Sell” rating on the stock at the current market price of $12.670, up 1.198% on 14 October 2019.
 
 
LOV Daily Technical Chart (Source: Thomson Reuters) 

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