By Emma Koehn
Fashion jewellery chain Lovisa says spending is still strong across its global network, with sales surging over the past few months as the company continues an aggressive expansion plan.
The Brett Blundy-chaired retailer told investors ahead of its annual meeting on Friday that sales were booming in the lead-up to Christmas.
Lovisa offers jewellery at a lower price point for consumers.Credit: Bloomberg
Comparable store sales, which compares shopfronts that are not affected by COVID-19 lockdowns, are up 16.1 per cent this financial year, while total store sales jumped by 60 per cent compared with last year, when lockdowns were more widespread.
Lovisa, which has a market capitalisation of $2.8 billion, now operates 676 stores across 26 countries. The company confirmed on Friday it is operating 100 more stores than this time last year.
“We continue our focus on expanding our store network, with 47 net new stores opened for the year to date,” the company said in a statement.
Retail analysts have been watching Lovisa as a bellwether for consumer spending sentiment, with its jewellery and accessories targeting a cohort of younger and more budget-conscious shoppers.
The company surprised the market in August when it reported a 116 per cent jump in net profit to $59.9 million for 2022.
At the time, Lovisa chief executive Victor Herrero said the brand’s products were “capturing the attention of existing markets and new markets” as consumers entered a more cautious period of spending.
There have been a number of increases to the cash rate in Australia since that time, but Australian Bureau of Statistics retail data suggests personal accessories spending is still strong.
Clothing, footwear and accessories retailing jumped by 2 per cent in September to hit $2.9 billion.
Lovisa’s share price went on a rollercoaster after the trading update, touching record highs of $25.68 but closed 7.2 per cent lower to $23.85.
The company’s shares have climbed steadily throughout 2022 and are up by more than 20 per cent this calendar year. While stock watchers are positive about the company’s long-term outlook, the numbers were not enough to change their valuation estimates, which are well below the current share price.
Investors also voiced dissatisfaction with the company’s remuneration structure on Friday, with the business receiving a second strike after 32.9 per cent of votes were cast against its remuneration report.
If more than 25 per cent of shareholders vote against a company’s remuneration report two years in a row, it triggers a second “strike” and gives investors the option of voting to spill the board.
Despite this, a motion to hold an extraordinary general meeting to spill Lovisa’s board was defeated after 87.3 per cent of votes were against this, meaning there will be no meeting to remove any of the company’s directors.
UBS analysts note the company is trading at a 136 per cent premium to the rest of the ASX small ordinaries index, and said on Friday morning their price target for Lovisa was $20.
Analysts had been expecting a strong trading update at the company’s annual meeting, noting that the combination of new store openings and the brand’s younger consumer base would stand it in good stead.
“Relative to other listed retailers, Lovisa’s younger customer base is likely to be less sensitive to rising interest rates and its low-priced products may be more conducive to price rises to offset cost pressures,” Citi’s equities team said in a note to clients.
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