Lovisa shares dive on softer-than-expected start to FY25
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More news: Lovisa shares plunged in morning trade on the ASX despite the jewellery retailer meeting earnings expectations for the 2024 financial year, as investors reacted to a softer-than-expected outlook for FY25.
Shares fell 12.3% to $32.72 by midday AEST, having advanced more than 50% over the last 12 months.
RBC Capital Markets analyst Wei-Weng Chen described Lovisa's full-year result as "largely in line with expectations" while its first-half update appeared lower than consensus forecasts.
The view was echoed by Citi analysts who flagged that the combination of a strong share price run into the result, slower-than-expected FY24 store rollout, and a softer-than-expected start to FY25 may result in "some share price weakness today".
Meanwhile, Jarden analysts said that the market should "ultimately focus on better unit economics" though the weaker trading update "may cause the stock to trade softly".
Lovisa boosts revenue by 17%, meets FY profit estimates
The news: Jewellery retailer Lovisa met average forecasts for the 2024 financial year after notching double-digit profit and earnings, as the company's expanding store network drove increased sales revenue.
The numbers: Lovisa reported net profit after tax of $82.4 million, up 20.9% on FY23 and broadly in line with consensus estimates of $83.1 million, according to Visible Alpha data.
Sales revenue grew 17.1% year on year to $698.7 million while EBIT was up 21.2% to $128.2 million. Gross margins were 81%, ahead of consensus forecasts of 80.4%. The company ended the financial year with 900 stores, compared to analysts' expectations over 914.
Lovisa declared a final dividend of 37 cents per share, ahead of 26 cents expected by analysts, and an increase on 31 cents a year earlier.
The context: Lovisa said strong growth in its store network in recent years drove sold sales growth despite comparable store sales being down 2% for the financial year. However, trading performance improved across the company in the second half with comparable store sales positive for the half.
The company noted that it has continued to focus on pricing and promotion management supporting both sales growth and gross margin expansion, in response to continued inflationary pressures.
Citi analysts noted that a number of newer markets saw no stores open during the year, including Taiwan, Hungary, Romania, Mexico. They also flagged that for the first eight weeks of FY25, like for like sales growth and total sales growth were at 2% and 12.7%, respectively, lower than first-half consensus forecasts of 3.1% and 20.2%.
Meanwhile, the analysts said that net eight new stores opened in FY25 to date, which would equate to 26 stores for the first half of the year at the same run-rate, behind consensus expectations of 85 net new stores.
What they said: "Given the strong share price run into the result combined with the multiple the stock trades at, the slower than expected FY24 rollout, together with a softer than expected sales and rollout to start FY25, we might see some share price weakness today," said Citi analysts.
The sources: ASX announcement, Citi research, Jarden research, RBC Capital Markets research
