LOV - Lovisa Holdings

[System]

Lovisa was established in April 2010 and has quickly grown to be one of Australia's leading specialist fast fashion jewellery retailers. It has over 220 company owned stores across Australia, New Zealand, Singapore, Malaysia and South Africa and franchised stores in the Middle East (Kuwait, the United Arab Emirates, and Saudi Arabia).

http://www.lovisa.com.au

 

[McLovin]

Woah, these guys run a seriously lean operation. $150m in sales. $16.5m in NPAT. $42m in assets (only $2m in goodwill), $11.1m in equity and $8.3m of that is in cash. Strip out the excess cash and arguably they are running their business with ~$5m in equity. They're turning their inventory every 5 weeks. Runs on an oily rag and has been pretty successful at rolling itself out so far. Not a lot of fat on the bones though, if something goes wrong.

 

[McLovin]

Nice result. NPAT $29m, very strong cashflow (even with a pretty aggressive store roll-out). SSS growing strongly, and still running on $28m of equity with $11m of that in cash.

 

[skc]

Nice result. NPAT $29m, very strong cashflow (even with a pretty aggressive store roll-out). SSS growing strongly, and still running on $28m of equity with $11m of that in cash.

Yeah... one of the stars for the reporting season so far.

Only 1 store added in Australia so perhaps it's getting saturated locally, but I don't see why the same model wouldn't work for other countries. This is a bit like the "Smiggle" of fast fashion jewelry.

And it's not even that expensive. Even at today $4.45, it's only 16x on ~28c EPS but with a pretty long growth runway. It should trade at 70x like DMP once did I think... alright may be not, but 16x is not expensive at all.

Discl. I hold some from high $3's. Wish I did the research and bought earlier...

 

[McLovin]

Yeah... one of the stars for the reporting season so far.

Only 1 store added in Australia so perhaps it's getting saturated locally, but I don't see why the same model wouldn't work for other countries. This is a bit like the "Smiggle" of fast fashion jewelry.

There is a slide in their prezo with anticipated total stores in Australia at 150, they're at 145 so pretty maxed out but they seem to have traction OS.

I think the comparison to Smiggle is a good one, the positive being that this like having Smiggle without all the legacy brands of PMV...That could also be the downside. I started buying just before I made my first post on this thread. I don't think the market realises/ed just how much cash this thing is spinning off. How many companies are there that have that sort of growth profile and are able to pay out 60% of their earnings. Even after today's run it's still on a ~4% yield.

They're about to churn a few products so that might slow down revenue growth in the short run, but the multiple isn't really demanding so i'm not too concerned.

 

[Value Hunter]

Mclovin the thing with retail is that its very much a business that is notoriously difficult to pick winners over the long-term with very few retailers maintaining their market positioning (and or margins) over the long-term. The list of retailers that were once upon a time putting out stellar results year after then went off the rails includes David Jones, Myers, Woolworths, Reject Shop, Harvey Norman, Oroton. Even Coles and Walmart have recently stopped growing. Not too mention all the lesser retailers that actually went bust. How confident are you that Lovisa will still be as relevant to consumers and command the same margins in 10 years time? For me 16x earnings for any retailer (except for maybe a predominantly online and fast growing retailer) seems to me to be not cheap.

 

[McLovin]

Mclovin the thing with retail is that its very much a business that is notoriously difficult to pick winners over the long-term with very few retailers maintaining their market positioning (and or margins) over the long-term.

You're correct, but it doesn't mean there isn't an investment case to be made. They have a pretty decent store roll out program going on that will drive growth in the short and mid term. I have no idea where they will be in ten years time, and it's not really relevant to me for the next eight or so years.

All the companies you listed did at one stage go through a high growth cycle. If you can strap your wagon to that for a few years then it doesn't really matter where the company is in 10-15 years' time.

 

[PinguPingu]

I love when fundamentals and T/A align. tfw you wish you had more cash to pyramid last month.

 

[peter2]

This has been a great trend if you're on it. I saw the key reversal on the weekly chart (arrowed) and passed on the opportunity. Having gone from $4 to $10, it can't go much higher (or so I thought).

I'm sure skc still LOV's it.

 

[McLovin]

Closed out this position fully after the FY18 result. Still a great business and I think they'll do well but I can see a reasonable pullback coming. Front ending a fair few expenses for the international rollout is going to keep pressure on CODB margins, coupled with sss tracking below their target. It was hard to justify the earnings multiple. I'm fairly sure I'll be back in at some stage. And now I have a $450k tax bill.

 

[barney]

And now I have a $450k tax bill.

Happy to take a small donation if it helps with your tax

I suppose a new car is out of the question?

 

[leyy]

Closed out this position fully after the FY18 result. Still a great business and I think they'll do well but I can see a reasonable pullback coming. Front ending a fair few expenses for the international rollout is going to keep pressure on CODB margins, coupled with sss tracking below their target. It was hard to justify the earnings multiple. I'm fairly sure I'll be back in at some stage. And now I have a $450k tax bill.

Well done McLovin, that's huge!

Did you continue to accumulate throughout the period? or just had a fairly large position to start off with?


Cheers
leyy

 

[McLovin]

Did you continue to accumulate throughout the period? or just had a fairly large position to start off with?

It was a bit below my usual position size. I just remember looking at everything and thinking what am I missing here, because on paper it was a no-brainer, so I held back a bit.

Like I said above, I think it's still a great business, but they're going aggressively overseas now which will require a big opex uplift. It's going to be hard for them to deliver the sort of bottom line growth numbers they have for the last couple of years while they ramp up in America. If America works then the combination of sss + big store rollout + decreasing CODB will put a rocket under the SP again. It is discretionary retail though so you've got to be somewhat cautious, although I think mainstream fashion is sort of universal these days thanks to Instagram etc, so there's less of a risk of getting a geography totally wrong. From my perspective it was that it was a priced for perfection with a rollout into the hardest consumer market on earth.

Retail is great because once you hit on a format that consumer like the business can be levered through leasing which means rollout can be fast, and not heavily reliant on capital.

 

[luutzu]

It was a bit below my usual position size. I just remember looking at everything and thinking what am I missing here, because on paper it was a no-brainer, so I held back a bit.

Like I said above, I think it's still a great business, but they're going aggressively overseas now which will require a big opex uplift. It's going to be hard for them to deliver the sort of bottom line growth numbers they have for the last couple of years while they ramp up in America. If America works then the combination of sss + big store rollout + decreasing CODB will put a rocket under the SP again. It is discretionary retail though so you've got to be somewhat cautious, although I think mainstream fashion is sort of universal these days thanks to Instagram etc, so there's less of a risk of getting a geography totally wrong. From my perspective it was that it was a priced for perfection with a rollout into the hardest consumer market on earth.

Retail is great because once you hit on a format that consumer like the business can be levered through leasing which means rollout can be fast, and not heavily reliant on capital.

Well done dude.

 

[Trav.]

Another volume stopping chart for learning purposes

System generated indicator picked this one perfectly and SP rising back up after low.

Still early days in researching this method but LOV had a pretty reasonable uptrend prior to dip which would be reassuring that it could rebound.

Price sensitive news was out on 29/10 triggering main fall

Thoughts ??

 

[Value Hunter]

Well done to Mclovin and the other guys who profited from the stock!!

 

[InsvestoBoy]

Woah, these guys run a seriously lean operation. $150m in sales. $16.5m in NPAT. $42m in assets (only $2m in goodwill), $11.1m in equity and $8.3m of that is in cash. Strip out the excess cash and arguably they are running their business with ~$5m in equity. They're turning their inventory every 5 weeks. Runs on an oily rag and has been pretty successful at rolling itself out so far. Not a lot of fat on the bones though, if something goes wrong.

Ever since McLovin knocked it out of the park on this one, I check back in just to see how it's going.

Down a cool 44% today for a total high=>low of ~-82%

Rough!

 

[rcw1]

Good morning
Jewellery retailer Lovisa reports (Lov) in an update ahead of its annual general meeting today, global comparable store sales for the first 19 weeks of FY23 continued the strong trajectory from the first 7 weeks of the financial year and were up 16.1% on FY22 for the year to date, with total sales for this period up 60% on FY22.

The retailer said it has continued its focus on expanding its store network, with 47 net new stores opened for the year to date, including 61 new stores opened and 14 closures. This has taken the store network to 676 stores across 26 countries.

Compared to this time last year Lovisa is currently trading over 100 more stores in five additional markets, with its first stores in Italy, Mexico and Hungary also due to open in coming weeks.

Highest SP recorded yesterday. Kindly conduct your own due diligence.
Not holding.

Kind regards
rcw1

 

[Knobby22]

Great growth and dividends.
Jewellery is just baubles but this company is going well. One of my yearly picks.