Lovisa shares slump on result

The jewellery retailer has seen currency impacts wipe out the benefit of growing same-store sales.

Lovisa is hopeful it will return to earnings growth next year.

Jewellery retailer Lovisa has seen its shares slump as much as 12 per cent, after it reported weaker profit than the prior year.

For the year to June 30, Lovisa announced a 6 per cent slide in net profit to $16.6 million despite a 14.3 per cent jump in revenue to $153.5m.

The group’s pre-tax earnings eased 2.4 per cent to $24.2m, at the lower end of guidance for pre-tax profit of $23.5m to $25.5m.

The group said the impacts of currency movements reduced pre-tax profit by 6 per cent and offset a 5.5 per cent rise in same-store sales.

“While the lower Australian dollar and depreciating South African rand adversely affected our results we were pleased to deliver EBIT $24.2m particularly after the additional sale and markdowns in the first half,” chief executive Shane Fallscheer said.

“Gross margins were 74 per cent, also in line with guidance.”

Lovisa shares stumbled 8 per cent to $2.76 on the report at 1.20pm (AEST) as investors took profits after pushing the group’s value up 23 per cent over the past fortnight in the hope glum guidance could be topped.

The Brett Blundy-backed group has endured a torturous 2016 on the local market after receiving a warm welcome for the 12 months following its successful ASX debut in December 2014.

Its fortunes took a turn for the worse in February as it reported weaker than expected half-year profit and guidance, due to a falling Australian dollar pressuring margins.

The half-year report wiped close to two-fifths of its value, with the clouds turning darker in April as its finance chief and chairman unexpectedly headed for the exit.

However, confidence in its profit projections since then helped drive a recovery in its share price until its earnings report today.

Lovisa is hopeful it will return to earnings growth next year, noting a “positive start” to the trading year.

“We expect fiscal 2017 to be a year of further growth for Lovisa as we continue to open new stores in all current markets,” Lovisa said.

“Same store sales growth target is consistent with prior years of between 3 per cent and 5 per cent, with trading margin improving to around 75 per cent.

“Coupled with the additional board and management capability and based on the strength of our integrated model, we have a solid platform for further growth and a confident outlook.”

Lovisa declared a final dividend of 2c a share, half of last year’s payout.