Lovisa Holdings’ Stocks Tumbled On ASX After Reporting FY19 YTD Comparable Store Sales Growth Below The Targeted Range Of 3 – 5%

On 30 October 2018, Lovisa Holdings Ltd (ASX:LOV) held its Annual general meeting. The Chairman Mr. Michael Kay started its speech by highlighting the company’s strong performance in FY 2018. He informed about the net increase of 38 stores in FY 2018, a 21 percent increase in revenues, 26 percent increase in EBIT and cash conversion of 104 percent in FY 2018. He told that the company continues to diversify its earnings geographically and all markets have performed well in FY 2018. He further told that the company is pleased with the performance of its two trial stores in California and the company is extending its trial to at least a further five stores prior to Christmas.

While talking about the FY 2019 Outlook, he discussed the political and trade concerns and he also said that in Australia, households are affected by rising power prices, low wage growth, rising mortgage rates and deflating property prices in most major cities. He assured that the company can continue to prosper and grow if it remains true to its fundamental purpose of bringing brilliantly inexpensive on-trend jewellery to its customers. He also added that to continue to expand internationally is an important part of mitigating concentration risk in the world where countries are becoming more inward looking. Mr. Michael Kay talked about some comparative weakness in the Australian market, which is still a disproportionately large part of the company’s portfolio. It is expected that disproportionate reliance on Australian sales will reduce as the Company’s international expansion gathers pace.Â

The Comparable store sales increased by 6.8 percent in FY 2018 driven by strong performance of Christmas and Boxing day sales periods in the first half and continuing to deliver on key trends in the fashion jewellery sector. The total global sales revenue of the company increased by 21.4 percent to $217 million in FY 2018. The Gross Margin of the company increased to 80.0 percent which is an increase of 120 basis points from 78.8% in the last year. The increase in the Gross Margin of the company was driven by the on-trend products, continued strong inventory management, and strong performance of Christmas and Boxing Day period in the first half of FY 2018. The company is continuing to focus on an investment in people and processes to make sure that it remains efficient as it grows, and it is able to execute on its strategic plans. The company reported that on year to date basis, the company is currently below its target comparable store sales range of 3 – 5%, with comparable store sales for the year to date -0.9% on last year. Following this news, the share price of the company decreased by 18.929 percent as on 30 October 2018.

In the last six months, the share price of the company decreased by 12.68 percent as on 29 October 2018. LOV’s shares traded at $6.810 with a market capitalization of circa $886.75 million as on 30 October 2018 (AEST 2:19 PM).

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