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Lovisa (ASX:LOV) share price soars on excellent HY24 report

The Lovisa Holdings Ltd (ASX: LOV) share price has jumped 10% in response to an impressive HY24 result.

Lovisa sells affordable jewellery to young shoppers in numerous countries, including Australia, the US and the UK.

HY24 result

Here are some of the main financial highlights for the first six months of FY24:

  • Total sales rose 18.2% to $373 million
  • Gross profit grew 18.9% to $301.1 million
  • EBIT (EBIT explained) increased 16.3% to $81.6 million
  • Net profit after tax (NPAT) went up 12% to $53.5 million
  • Dividend increased 31.6% to $0.50 per share

Global comparable store sales for the period were down 4.4% year over year.

Looking at the regional breakdown for total sales, ANZ sales fell 1.9% to $111.7 million, Asian sales increased 4%, Africa and Middle East sales rose 2.4% to $28.9 million, European sales rose 32.1% to $120.3 million and the Americas sales jumped 46.3% to $91.4 million. Europe and North American sales seem to be exciting investors about the Lovisa share price.

The company’s strong store network growth offset the impact of negative same store sales. Lovisa now has stores in more than 40 markets.

Somewhat surprisingly, the gross profit margin improved 40 basis points (0.40%) to 80.7%. This was due to “ongoing management of pricing structures” which allowed the continued gross profit margin. The company said it had a clean inventory position.

The cost of doing business (CODB) was higher because of inflation and its spending on growing the store network – it takes a bit of time for the full revenue for a store to flow after the spending has occurred.

Its $14.3 million capital expenditure included 68 new company-owned stores built for the period as the store rollout continued. Its interest costs increased as part of a deliberate focus to introduce higher debt levels onto the balance sheet, and higher interest rates also had an impact.

Store growth

The company added 53 net new stores over the six-month period and it added 139 net new stores over 12 months to the end of the HY24 result. I think the Lovisa share price performance over the next five years will be driven by how many (profitable) stores it can open in the coming years.

In the USA it added 17 net new stores to finish with 207 stores. It’s now trading in 41 US states.

The business entered three new markets in the period, being China, Vietnam and the new franchise market of Ecuador.

Outlook for the Lovisa share price

In the first seven weeks, comparable store sales were up 0.3% year on year, while total sales were up 19.6% year on year.

Since the end of the half-year it has opened another nine new stores, taking the store network to 860, including its first store in Dublin (Ireland), adding another new market to the network.

The company said it’s focused on growing both its physical and digital store network.

I believe the business has a very promising future, particularly in Asia and North America. With growing total sales, a rising net profit (despite investing heavily), an improving gross profit and a growing dividend there’s a lot to like about the future.

It’s not as cheap as it was yesterday, or anywhere as cheap as a few months ago. I think the Lovisa share price will probably be higher in three years than today, but there could be enough volatility to find a better price in the next year or two.

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