Pinned valuation:
LOV valuation of $ 27 based on their 1H FY24 results, and Investor presentation released on 22/02/204.
Positives
Revenue up 18.2% to $373m with improving trend through Q2
Gross Margin 80.7%, up 40bps
74 new stores opened during the period, 854 at period end
China and Vietnam markets opened during the half year
EBIT $81.6m up 16.3%
Net Profit After Tax up 12.0% to $53.5m
Operating cash flow of $150m up 29.1% on prior period
Net Cash of $15.5m at period end, with $120m of available cash facilities in place
Reduction in CEO Long-Term Incentive expense from $15m in the prior half year to $6m in the current period.
Interim Dividend of 50.0 cents per share, 30% franked
Negatives / What to Watch
Comparable store sales down 4.4% on HY23
Inflationary pressures in most areas of the business, particularly on wages resulted in higher cost of doing business.
Interest expense increasing due to the associated increase in lease liabilities combined with a higher interest rate environment and higher debt levels.
Company's Future Focus
Lovisa will continue to focus on expanding both their physical and digital store network in existing and new markets.
I went to the Taylor Swift concert in Sydney on Friday night (don't ask me what the compounded earnings could be on what we spent on that little escapade!) and my wife and daughter mentioned buying something at Lovisa for the concert. I said that shares had gone up 15% this week after they released their earnings report. Their reaction? "Of course! Duh - take a look around!!": we were totally surrounded by people wearing a ton of cheap jewellery.
No doubt the results had more to it than a Taylor tour however seeing the money spinner that these concerts created first hand was an absolute eye-opener, I have no doubt that there was a direct effect. Hindsight is 20/20 - maybe I could have offset some of the expense!