Lovisa shares glitter as profit growth shines

Lovisa shares glitter as profit growth shines

Solid FY21 results have encouraged investors to buy into jewellery retailer Lovisa (ASX: LOV) today, sending the company’s share price up by around 20 per cent at its peak.

By the time the market closed LOV shares were up 17.61 per cent at $19.30, adding $310 million to Lovisa's market capitalisation in the process.

The sharemarket rush followed Lovisa's results that showed consumers accessorised in droves around the world, giving the company a 43.4 per cent surge in net profit after tax (NPAT).

“We are pleased with the performance of the business for the year, in particular with the sales performance we saw across most markets since the end of Q1FY21 with solid trading despite the continued global challenges we face with the impact of COVID,” Lovisa managing director Shane Fallscheer said.

“The strength of our balance sheet and the current global footprint puts us in a great position to take advantage of future opportunities as they arise.”

During FY21, Lovisa received $11.8 million in wage subsidy grants globally, all of which were paid to employees as salaries and wages, including amounts paid to stood down team members.

Without the $11.8 million in wage subsidies, the group’s earnings would still have been up on the $44.7 million achieved in FY20 .

A key driver of growth for Lovisa was its store roll-out internationally.

While it slowed during the past 18 months, the store networked increased to 544 at the end of the financial year as a result of the addition of 87 new stores in Europe.

Most of the new stores were added in Germany (38) and France (31). The company’s seven stores in Vietnam were all closed in FY21.

Sales growth was also bolstered by Lovisa’s focus on its digital capabilities during COVID-19 lockdown periods, with total sales up by 178 per cent for the year.

“We now have websites servicing all of the company owned markets we operate in, including in the new European markets, with local sites operational in local currency and languages,” Lovisa said.

During the year, Lovisa acquired the European retail business of German wholesaler beeline GmbH, which helped the country enter six new markets (Germany, Switzerland, Netherlands, Belgium, Austria and Luxembourg).

Of beeline’s 114 stores, the Melbourne-based retailer has converted 87 to Lovisa-branded stores, with the remainder exited at or around the time of handover on the basis they are not suitable sites for the brand.

The beeline acquisition was cash flow positive immediately, with the acquired cash of 11.8 million euros offsetting implementation costs.

In the first eight weeks of FY22, Lovisa says stores that have been able to trade have seen comparable-store sales growth of 37.8 per cent on the same eight weeks last year.

“We continue to focus on opportunities for expanding both our physical and digital store network however physical store opening progress is expected to continue to be slowed in the remainder of calendar 2021 due to logistics capacity challenges in the movement of new store cutouts into our global growth markets,” Lovisa said.

“The store network is currently at 551 stores, and our balance sheet remains strong with available cash and debt facilities supporting continued investment in growth.

“As a result of the current uncertainty in the global economic environment we are not in a position to provide any further information in relation to outlook for the business.”

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