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Lovisa (ASX:LOV) share price drops after solid FY24 update

The Lovisa Holdings Ltd (ASX: LOV) share price is down 1% after reporting its FY24 trading update.

Lovisa has a global network of stores selling jewellery to people in numerous countries across the world.

Trading update

Lovisa said that global comparable store sales in the first 20 weeks of FY24 fell 6.2% compared to FY23 in the (financial) year to date, with total sales for this period up 17% on FY23.

The retailer explained that it’s benefiting from continued growth in the store network over the past year.

Lovisa has continued to focus on expanding its worldwide store footprint in the first 20 weeks of the financial year.

It has managed to open 35 net new stores in FY24 so far, which includes 55 new stores opened and 20 stores being closed, with 12 of those closures relating to the conversion of the UAE franchise business to company-owned. Store growth could be a key factor for the Lovisa share price over the next year or two.

Lovisa now has a store network of a total of 836 stores in 40 markets. Its latest (franchise) market in FY24 to date was Ecuador in September.

The company pointed out that compared to this time last year, it’s currently trading from 160 more stores in 14 additional markets, and it expects to open its first stores in Vietnam and mainland China in the coming month.

My thoughts on the Lovisa share price

It wasn’t a surprise that comparable store sales continue to show a decline, though it has worsened since the FY23 result release date – in the first seven weeks of FY24 comparable store sales were down 5.8% year on year, though total sales were up 13.1%.

I think this update vindicates Lovisa’s store opening plan because it’s leading to overall growth for the business during this difficult period of weaker economic conditions.

The store count could grow significantly in the coming years, which is why I believe the current Lovisa share price could represent a great long-term opportunity. Increased scale could help profit margins, boosting net profit faster than revenue over time.

I’m excited by how much the profit and dividend could rise over the next several years.

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At the time of publishing, Jaz owns shares of Lovisa.
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