Costume jeweller Lovisa’s chief, Victor Herrero’s incentive payments cut by $15m

Victor Herrero, the chief of costume jewellery chain Lovisa and one of Australia’s highest-paid CEOs has taken a $15m hit to his remuneration in the current financial year thanks to softer results.

Lovisa now has more than 900 stores worldwide. Picture: The Observer

One of Australia’s highest-paid executive has taken a massive cut of almost $15m to his remuneration.

It’s been revealed Lovisa chief executive Victor Herrero’s long-term incentive expense has been cut from $27m to $12m in the current financial year.

The costume jewellery retailer’s sales growth was slower than expected since the start of the new financial year, even as sought to open more stores overseas.

The group reported that during trading for the first eight weeks of the 2024 fiscal year, comparable store sales increased by 2 per cent on the same time last year, which was less than the 3.1 per cent expected by markets.

Total sales for this period were 12.7 per cent as a result of 128 new stores opened internationally in the 2024 financial year.

The sluggish start has been attributed to the widespread problem retailers face drawing customers due to inflationary and living costs.

Mr Herrero on Tuesday told investors the company has had to undertake more promotional and discounting activity to entice customers.

“In response to the continued inflationary pressures globally we have continued to focus on pricing and promotion management supporting both sales growth and gross margin expansion,” he said.

“We continued to invest in rolling out new markets, new stores in existing markets, and the structures required to manage them effectively on an ongoing basis to drive a more efficient operating model.”

The group battled inflationary pressures in most areas of the business, but in particular on wages which resulted in a higher cost of doing business. But this impact was offset by a reduction in the CEO’s long-term incentive expense from $27m in the previous year to $12m in the current year.

As a result, Mr Herrero took home $13.97m in remuneration for the year compared with $29.09m in the previous corresponding period.

Despite the 52 per cent decrease, Mr Herrero is still one of the best paid executives in Australia. His remuneration is almost double the $7.17m paid to Matt Comyn of Commonwealth Bank – the largest company listed on the ASX.

Lovisa reported that revenue increased 17.1 per cent to $698.7m as net profit firmed 20.9 per cent to $82.4m.

Lovisa chief executive Victor Herrero.

The ASX-listed retailer opened 128 new stores internationally in the 2024 financial year, increasing its footprint to 900 stores worldwide at the end of June – which helped to deliver a 21 per cent jump in profit to $82.4m, in line with expectations.

Since July Lovisa has opened 10 new stores and closed two, making the current total store count 908.

The store count was fewer than the that 914 analysts had expected and came as it expanded its presence in Africa with openings in Senegal, Guadeloupe and Gabon, Ivory Coast and Republic of Congo.

The strong base built in Europe allowed the region to deliver the largest share of new store growth for the year with 50 new stores opened – led by France where another 18 opened.

Mr Herrero said that Lovisa would continue to roll out more stores over the next 12 months, particularly in Africa.

“We continue to focus on opportunities for expanding both our physical and digital store network, with structures in place to drive this growth in existing and new markets and expect store rollout to continue,” he said.

“Our balance sheet remains strong with available cash and debt facilities supporting continued investment in growth.”

RBC Capital Markets analyst Wei-Weng Chen said the soft outlook update appeared lower than current consensus expectations and would weigh on shares.

Lovisa shares fell almost 13 per cent on Tuesday to $32.45, but are more than 50 per cent higher than this time last year.