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Why the Lovisa Holdings Ltd share price rocketed 15% higher today

The Lovisa Holdings Ltd (ASX: LOV) share price has been a huge mover on Friday morning.

At one stage the fast-fashion jewellery retailer’s shares were up 15% to an all-time high of $7.76. They have since given back some of these gains, but still sit 12% higher at $7.56.

What happened?

This morning Lovisa provided the market with a trading update. As you might have guessed from the share price reaction, it was another positive one.

According to the release, unaudited first-half sales were up 18.8% on the prior corresponding period.

While part of this was driven by its ongoing international expansion, pleasingly the company reported a sizeable 7.4% lift in comparable store sales during the period. I think this is especially impressive given the weak consumer environment.

As a result of this strong first-half sales result, half-year earnings before interest and tax is expected to be in the range of $34.5 million and $35 million. This equates to a lift of between 22% and 24% on the first-half of FY 2017.

Should you invest?

While Lovisa is by no means the bargain buy it was a year ago, I still see a lot of value in its shares today for patient investors willing to make a long-term investment.

Unlike retailers such as Myer Holdings Ltd (ASX: MYR) and Oroton Group Ltd (ASX: ORL), Lovisa is becoming increasingly relevant with consumers. Especially those looking for affordable jewellery on a regular basis.

Furthermore, the relatively small size of their stores is a big positive in a retail industry being crippled by high rents.

But above all else, the reason I have been bullish on Lovisa for some time now is its international expansion. One market in particular which I am excited about is the United States market.

The company recently launched its first store in California and I’m optimistic that it won’t be its last. If it can penetrate the market successfully, there would arguably be an opportunity for hundreds of stores throughout the country.

In light of this, I would put it up there with Premier Investments Limited (ASX: PMV) and Super Retail Group Ltd (ASX: SUL) as a great option in the retail sector.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. The Motley Fool Australia owns shares of Super Retail Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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