Lovisa

• Type: Fast-fashion jewellery retailer.
• Founded: 2010 in Sydney, Australia.
• Products: Affordable, trend-driven jewellery and accessories (earrings, necklaces, rings, hair accessories).
• Style: Inspired by runway and street fashion; focuses on frequent style updates.
• Price Range: Low to mid-range (typically $10–$50).
• Target Audience: Fashion-forward shoppers looking for affordable accessories.
• Global Presence: Over 1,000 stores in 50+ countries.
• Brand Positioning: “Brilliantly affordable, on-trend jewellery”.

Jewells (new brand)

• Type: Premium fine jewellery brand launched by Lovisa in 2025.
• Founded: 2025 in the UK by Brett Blundy (Lovisa founder).
• Products: High-end jewellery including 14-karat gold, lab-grown diamonds, gold vermeil, birthstone pieces, and collectible charms.
• Style: Elegant, elevated, and contemporary; positioned as a luxury evolution of Lovisa.
• Price Range: £30 to £3,000 (approx. $60–$6,000).
• Target Audience: Style-conscious customers seeking premium jewellery and experiential retail.
• Store Experience: Offers luxury piercings, fine-line tattoos, personal styling, and interactive “Make Your Own Memory” stack bars.
• Current Footprint: 7 flagship stores in major UK shopping centres (Westfield London, Bluewater, Lakeside, etc.), with plans for global expansion to 1,000+ locations in 5 years

Why is it an attractive business?

Software like gross margin at 80% and relatively high asset turnover.

Small format stores, lower wage staff, same format/layout in every country.

All results in high ROE.

100 new designs each week and quick to store via air freight - low inventory obsolescence risk.

Low ESG risk as quick fashion but low landfill with textiles.

Risks

Competition. Harli+ Harpa start up in Auss/NZ by ex CEO. Slightly higher price point and does mens as well. Similar to Jewels concept trialed in UK.

Online retailing. Less profitable for Lovisa due to high cost of postage on low value items. Most prefer to touch so think less of a risk.

Tariffs. None issue really as high gross margin pass on cost. US only too.

Class Action seems manageable as per below - Probably looking at $150M max?

Macro risk with decline in consumer spend? low price point and lipstick effect?

Class action

·      The class action alleges systematic underpayment and workplace breaches by Lovisa Pty Ltd between January 2019 and January 2025, including:

·      Failure to pay overtime and other entitlements under the Lovisa Enterprise Agreements (2014 & 2022) and the Fair Work Act 2009 (Cth).

·      Directing staff to skip meal and toilet breaks during extended shifts.

·      Requiring unpaid pre-shift and post-shift work (e.g., arriving early or staying late to clean and balance tills).

·      Mandating extra hours during peak periods (e.g., Christmas) via “Individual Flexibility Agreements” without proper overtime pay.

·      Unpaid training and requiring staff to purchase and wear Lovisa products.

·      Alleged breaches span over a decade, impacting an estimated 1,000 current and formr employees.

 Scale of the Case

·      Registered Group Members: Over 500 confirmed, with estimates exceeding 300–1,000 affected staff.

·      Claims seek underpayments, interest, and penalties.

 Key Factors Driving Exposure

• Class Size: Estimated 300–1,000 employees affected. [aderolaw.com.au]
• Period: Six years (2019–2025).
• Claims: Unpaid overtime, missed breaks, unpaid training, forced product purchases, and penalties under the Fair Work Act. [aderolaw.com.au], [ragtrader.com.au]
• Comparable Cases:
• Woolworths underpayment case: $571 million for ~250,000 staff in 2021. [flux.finance]
• Retail wage class actions often settle at $5,000–$15,000 per claimant, plus penalties and legal fees.

Valuation

PE high for a retailer so likely compression as growth slows.

Consensus EPS of $1.86 by FY30. Reasonable? ~1000 stores currently. Looks like could double that globally. Morningstar thinks they top out at 1700 globally but seems low (Claire's alone was 2000). Some like for like store sales growth. Claires bankruptcy in US so could get some prime stores. So possible target but perhaps as stretch.

From $31 current market price

Scenario 1 to FY30:

·       37.5% decline from PE moving from 32x to 20x.

·       142% increase from EPS growing from $0.77 to $1.86

 ·       $37.20 PT in FY30 (20% capital return)

 ·       20.2% from dividends.

 ·       ~7.3% pa

Scenario 2 to FY30

·       PE decline from 32 to 25x

·       142% increase from EPS growing from $0.77 to $1.86

 ·       $46.50 PT in FY30 (50% capital return)

 ·       20.2% from dividends

 ·       ~11.46% CAGR

Reasonable return but would prefer a bit lower price to be confident. Seems 10%pa returns around current price.

Does anyone have an idea for the sell off today? Retail sales figures aren't out yet?

First glance.

Looks like a strong result from me. LFL store sales down but already seeing a recovery this half.

Looks like they came roughly in line with consensus revenue ($273M actual v $275M expected) and profit ($54.4M actual v $55.43 expected). Using TikR consensus but did see in the AFR some had this as a beat.

Interested to see what happened with the shorts and share price today - would not have a clue.

All up thesis on track, guess ignore whatever happens to the SP unless it presents an opportunity.

LOV ASX: Lovisa shorts hit $100m ahead of results (afr.com)

Short sellers are piling into Lovisa Holdings at the highest level in almost four years before what could prove a pivotal market update on the health of the discount jewellery retailer on Thursday.

Hedge funds betting against the stock now make up about 4 per cent of the share float, the most since 2020, when short positions topped 7 per cent amid sweeping pandemic-induced store closures and a global retail slump.

About $100 million is betting against Lovisa’s share price before its half-year result on Thursday. 

Shorts against Lovisa started to rise around November when the retailer reported a 6.2 per cent drop in same-store sales during its expansion effort in the US and China. That missed market expectations, fuelling shareholder concerns about chief executive Victor Herrero’s $30 million salary.

Short positions have accelerated in the lead-up to the retailer’s half-year report on Thursday and now amount to about $100 million – the highest level in dollar terms since the stock listed almost a decade ago.

“Expectations are very high coming into this result,” a local long-short fund manager, who is betting against the stock and was not authorised to speak publicly about the trade, told The Australian Financial Review.

“It’s been priced for perfection,” the fund manager, citing the stock’s historically high share price, mounting global headwinds for retailers and declining same-store sales as the reasons behind the fund’s short bet.

“Some of the new stores may not be achieving the level of economics that the market analysts have been expecting.”

Analysts had become increasingly divided on the Lovisa stock as the half-year report approached. UBS downgraded Lovisa to neutral last month, noting that the shares had rallied substantially (up 48 per cent) since November and pointing to growing signs that the store rollout was losing steam.

Jarden, which upgraded the stock to a buy in November, has held firm on its valuation, even as its analyst Ed Woodgate cautioned that investors should be “buying for the long term” as there “may be surprises before then”.

“Like every other retailer, Lovisa is facing a tough consumer environment,” he said in a note this month.

“While the trading update may be weak as Lovisa has to cycle one more period of strength and the net store rollout may disappoint, we expect investors will start to look long term once the worst of the bad news is in the rearview.”

Funds also appear similarly divided on the stock. Hyperion, ECP Asset Management and Fidelity are among those holdings large long positions, based on recent filings.

QVG’s Chris Prunty, who counts the stock among the largest holdings in the firm’s long-short fund, is bullish on the outlook.

“We like Lovisa because the return on capital on new stores is very high, and they have a long runway to open stores in existing markets like the US and new ones like China,” he said.

“We understand the market has some concerns around the generosity of the CEO’s remuneration package, but we believe that if he can replicate half the success he had as Zara’s head of APAC, then he will have been underpaid,” he said.

One Lovisa short-seller says the stock could slip as much as 30 per cent – should the fund’s thesis behind the short play out.

“What we’ve seen with companies on high multiples in the past is that when you start to see cracks in the business, the market tends to be a bit more forgiving, until the cracks become the crevices,” the short-seller said, citing Domino’s Pizza and Pro Medicus as two stocks to have suffered this fate in recent weeks.

That said, funds that have been holding Lovisa for some time might not blink at the near-term dip short-sellers are betting on. The shares are up more than 1000 per cent since it listed in 2014 and more than 150 per cent in the past five years.