Lovisa Holdings Limited

ASX:LOV

Lovisa Holdings Limited

ASX:LOV
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$29.91 (+3.1%)
Last close price
#71
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13
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39
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Reports (6) My Report Forum Investors
Forum Topics LOV LOV Store Rollout

Pinned straw:

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Karmast
Added one year ago

Lovisa is a good retailer and has been doing well but it's too expensive for me. Compared to Nick Scali for example its a much riskier proposition -


Lovisa Nick Scali

Founder on Board in Brett Blundy but he's very diversified Founder CEO and totally focused

CEO is grossly overpaid at $20 million annually and owns 2% CEO is paid $1.5 million annually and owns 14% of the company

EPS growth over past 6 years of 13% p.a. EPS growth over past 6 years of 21% p.a.

Sales per share growth over past 6 years of 22% p.a. Sales per share growth over past 6 years of 17% p.a.

ROE of 85% and ROC of 17% ROE of 56% and ROC of 22%

Debt to equity of 465% (includes leases) Debt to equity of 176% (includes leases)

Net profit margin of 11% p.a. and going sideways/declining Net profit margin of 20% p.a. and growing

Owns $370 million of its own properties and equipment Owns $320 million of its own properties and equipment

Has $65 million in non lease debt vs $30 million in cash Has $91 million in non lease debt vs $149 million in cash

More international potential and going well but adds complexity Less international potential but still planning to double domestic store count

Currently trading at 30 times EPS Currently trading at 9 times EPS


Bottom line for me is that they are both great businesses and retailers but there are a few more warts on Lovisa and I have to pay three times the price to own it. So, not much needs to go wrong for the multiple to compress in Lovisa, which is much less likely with Nick Scali.

IRL I own NCK but not LOV at present.




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mikebrisy
Added one year ago

@Karmast great side by side analysis. I own both, preferring $NCK for quality and $LOV for global growth runway.

I am much more bullish on $LOV than you. With the business model established (fast fashion design cycle, supplier base, global supply chain incl. DCs, store unit economics, online, brand) and proven, its now about execution against a truly global market. This is not complexity in my view, but execution at scale. It will require ongoing discipline in signing the right stores in the right locations (but that appears to be a capability they have proven, and there should be no reason for it to change.)

From a retail perspective, the breadth of the market is stunning. A high disposible income customer in a high income market will buy the same item to wear once and be prepared to trash at a festival, as a low-to-middle income customer in a developing market might buy for a special occasion and cherish for years. The products have as much global reach as a Big Mac.

I've been amazed on my visit to Carindale in Brisy, during off-peak hours to see many of the stores completely empty, but a healthy crowd buying stuff in the local $LOV store, so I think they can ride any retail downturn relatively well ("lipstick effect").

I also have confidence that very highly paid Victor Herrero will continue to execute. He has excellent form from his time rolling out Zara in Asia Pacific (which has a similar business model).

The core of the thesis for $LOV is that it is very early days in the global rollout, whereas $NCK still has growth potential, but is much more mature. Anthony can see this which is why he is eyeing the UK, and that brings a whole new level of execution risk.

I agree we are paying up much more for $LOV and with that comes the risk that, if there is a hiccup in execution, then that could lead to a costly re-rate.

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Karmast
Added one year ago

Yes agreed @mikebrisy the global market for Lovisa is exciting if they can keep executing. So no disagreement on the upside potential and it's great they have a CEO now with a track record. I'd happily buy if the price came down on some short term news, so patience is required for me and happy to hold Nick Scali in the meantime.

UK is a new risk for NCK for sure although Anthony has an unblemished record, especially after how well Plush acquisition has gone, so he gets the benefit of the doubt from me if he does decide to go there.


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Solvetheriddle
Added one year ago

@LifeCapital thanks for sharing, as i said in my preso (as i recall lol), singing favourable leases is the biggest hurdle i see to growth, perversely strong retail trends (good for sss) probably embolden landlords to ask for higher rents, so a weak environment is probably preferred through the lease sign up stage, or at least not strong. signing a poor lease is one of the worst things a retailer can do, as i recall the leases are 3-5 years in length so you are burdened for a while. LOV exited Spain due to this reason, as i recall, now back in.

i have already done some buying in the low $18, a $17 handle i would buy more, it is volatile but has been one of my best stories for a while


disc held

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mikebrisy
Added one year ago

@LifeCapital Thanks for sharing the intell.

Personally, I don't mind if the rollout pace moderates. CEO Victor Herrero has made clear that its about getting the right locations with the right lease deals. US retail is still in rude health, as evidenced by overnight's retail sales numbers for September and strong upward revision for August. Should retail start to hit choppy waters, that's when you'd expect to see $LOV get more aggressive on doing lease deals.

I may be wrong altogether, but I see slowing numbers growth as evidence of capital discipline. A big part of my investment thesis is the unit economics at the store level.

All that said, I'd like the SP to weaken on this one, as I am only holding about one-third of my intended position in RL based on the view that there is more retail pain to come.

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