At the time of writing, the share price of Lovisa Holdings Ltd [ASX:LOV] is trading at $11.57, up 15.35%. News of a European acquisition saw the Lovisa share price jump up into positive territory.
As you can see, the LOV shares are starting to punch higher over the last couple months:
Source: Optuma
LOV share price reacts to acquisition
The jewellery retailer saw its share price fall from the high in October 2019.
The fall turned into a steep descent when COVID-19 showed up.
In turn, savaging the share price by 83.42%, as seen in the chart below.
Source: Optuma
Lovisa then moved into survival mode.
Now operating 434 stores globally, the company experienced disruption to normal trading conditions due to the virus.
This caused a significant reduction in sales for Q4.
The company reported ‘Sales Revenue (excluding Franchise Revenue) for the full year ended 28 June 2020 of $237 million, compared to $249m in FY19.’
However, with stores globally locked down, their online business exploded to deliver 256% growth on the prior year during Q4, with trading websites now operational across most markets that Lovisa trades in.
The company announced recently the acquisition of a European retail store network.
Based in Germany, wholesaler ‘beeline GmbH’ is expected to add more than 80 stores to the Lovisa brand across six European countries.
Is the Lovisa share price reflecting recovery hopes?
Looking at the chart the LOV share price is on a strong run up since the March low.
With the news of the European acquisition driving the price higher today.
Source: Optuma
If this continues it may bring the levels of $11.97 and $12.78 into play. If there is a retracement, the share price may fall to $10.40 or $8.80.
With lockdown ending people want to get back to normal life, this could play into Lovisa’s favour and push sales.
Christmas is coming up fast, which may further boost profits and the share price for Lovisa.
In many ways the Lovisa share price may reflect recovery hopes, as retail in Australia gets back to normal.
Regards,
Carl Wittkopp,
For Money Morning
PS: A few years ago, Lovisa was a small-cap, before it hit the $1 billion market cap mark. Check out these four small-cap companies that could thrive in the post-lockdown world.
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