The Lovisa (ASX:LOV) share price has been surging higher on expectations around the company’s global expansion strategy. Here’s the lowdown.
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A surprising success story to emerge out of the last 12 months has been Australian jewellery and accessories retailer Lovisa Holdings Ltd (ASX: LOV). After a dramatic fall during the market crash last March, the Lovisa share price has rallied strongly since and is now back above its pre-COVID price and trading around new all-time highs.
Let’s take a look at how the retailer has been performing.
What’s been driving the Lovisa share price?
Lovisa sells on-trend, but affordable, jewellery and accessories. The company aims to deliver a unique in-store shopping experience, with Lovisa stylists providing customers with personalised styling tips and advice. Since launching its first brick-and-mortar store back in 2010, the company has expanded internationally, and now has a presence in 15 countries.
Lovisa’s first-half FY21 results were pretty weak overall. Revenues were down 9.8% versus the first half of FY20 to $146.9 million, while net profit after tax plunged 22.6% to $21.5 million. Despite this, the Lovisa share price surged on the day its results were released.
The results were heavily impacted by COVID-19 lockdowns in various geographies. Strict lockdowns in Victoria hurt sales over the first quarter, but once those restrictions eased, Lovisa reported a strong rebound in foot traffic. However, this was offset by market headwinds in the United States and Europe due to the continuing effects of the pandemic.
A positive sign for investors is that Lovisa has continued with its global expansion plans throughout the pandemic. Lovisa added 25 new stores during the six months ending 31 December 2020, bringing its global total to 460 stores. Fourteen new stores were opened in the US, as well as four in France and four in Australia.
The company also agreed to the acquisition of the European stores of German wholesaler Beeline in November 2020. Lovisa plans to convert around 90 Beeline stores located in six new European markets to Lovisa branding by May 2021. This will give Lovisa a significant presence in Germany, Switzerland, the Netherlands, Belgium, Austria and Luxembourg.
Outlook for FY21
Continued uncertainty around the impacts the pandemic will have throughout the remainder of FY21 make it difficult for the company to commit to a firm earnings outlook. However, Lovisa does note that trading over the first seven weeks of the second half of FY21 has continued to rebound in the Southern Hemisphere.
Despite challenging conditions persisting in the Northern Hemisphere, comparable store sales were up 12% overall during those first seven weeks, suggesting the possibility of a strong rebound over the second half should those green shoots continue to sprout.
Other retailers performing well
The Lovisa share price isn’t the only ASX retail share soaring to new highs, as investors try to price in a possible economic rebound over the next few months. Plus-size women’s clothing retailer City Chic Collective Ltd (ASX: CCX) has also had a stellar run over the last few months, as has Premier Investments Limited (ASX: PMV), the owner of the Just Jeans, Peter Alexander and Jay Jays brands.
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Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.