Early on Friday morning, popular accessories and dress jewellery company Lovisa Holdings [ASX:LOV] decided to share a trading update ahead of its Annual General Meeting (AGM).
Lovisa revealed global comparable store sales for the 2023 financial year — the company revealed a 16.1% increase on FY22 year to date, with total sales having also lifted significantly.
Interestingly, Lovisa shares had taken a 6% loss in value by the early afternoon.
Nevertheless, a LOV share would have set you back $24.19 (at the time of writing), and the discretionary consumer stock has, in fact, spiked by more than 20% in the year to date.
Source: tradingview.com
Lovisa’s trade update: rising sales and falling shares
The wearable trinkets and accessories company today presented markets with a short and sharp trade update ahead of its upcoming AGM.
LOV was seemingly pleased with its results for the fiscal year so far — but shareholders evidently were not so easily won.
For the first seven weeks of the FY23 financial year, Lovisa said that it noted a continuing ‘strong trajectory from the first 7 weeks’ and celebrated global comparable sales increasing 16.1% in the year so far, compared with the same timeframe in FY22.
As for total group sales, Lovisa reported a 60% increase from the prior year.
These results suggest a very ‘strong’ start to the new fiscal year when isolated as standalone metrics.
However, shareholders are no doubt reflecting on the holistic reality when comparing previous years’ COVID-related lockdowns and restrictions, which had severely impacted the retail sector over that time.
Lovisa specified that comparable store sales are being measured based on those open and ‘able to trade’ and not including stores that remain closed due to continuing government-imposed lockdowns.
Aside from its trade update, the jewellery retailer also wished to share its expansion progress for the year so far.
Despite 14 stores remaining closed, Lovisa has opened 47 net new stores this year and is excited by a further 61 new stores.
The company commented on its ambitiously growing collection, which stretches the globe:
‘This has taken the store network to 676 stores across 26 countries, including four new markets opened in recent months with Canada and Poland opened at the end of FY22, and since then our first stores established in Namibia and Hong Kong.
‘Compared to this time last year we are currently trading over 100 more stores in 5 additional markets, with our first stores in Italy, Mexico and Hungary also due to open in coming weeks.’
LOV set for growth
Lovisa reported a 59.3% increase in revenue for the full fiscal year of 2022, totalling $459 million — $361.8 million in profit — and $265 million in cost-of-business expenses.
Store sales were up by 19.9% in 2021, with the previous year having been severely impacted by government-enforced store closures.
The company’s net cash was sitting around $24.2 million, and final dividends gave 37 cents a share (30% franked).
Notably, more stores will be opening and operating in comparison with last year’s, as a result of new store expansions and, hopefully, as further restrictions ease.
With this in mind, Lovisa is expected to make significant revenue increases. Whether or not the company executes its expansion to the detriment of incoming funds could become an issue later on.
After all, growing faster than gains, especially in an unpredictable environment, can have some uncomfortable side effects if not carefully managed.
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Regards,
Mahlia Stewart,
For Money Morning
