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Why the Lovisa Holdings Ltd share price is being crushed today

One of the worst performers on the market on Wednesday has been the Lovisa Holdings Ltd (ASX: LOV) share price.

At the time of writing the fast-fashion jewellery retailer’s shares are down almost 9% to $9.13.

Why are Lovisa’s shares being crushed today?

Lovisa’s share price has been crushed today after it announced the shock resignation of its CEO after the market closed on Tuesday.

According to the release, Steve Doyle has resigned as the company’s CEO to pursue other interests and will be stepping down from the role on April 20 2018. Founder and managing director Shane Fallscheer will continue to lead the company.

The release did not elaborate further on Mr Doyle’s plans, but did attempt to quash any concerns that his departure was performance related.

Pleasingly, business continues to boom for the retailer and a trading update reveals that same store sales growth has accelerated to 7.6% year-to-date, as of the end of the third-quarter. During the same period total sales are up a sizeable 20.3%.

Should you buy the dip?

When a CEO leaves suddenly it is rarely a good look for a company, especially given the resignation of its CFO last year. So I can’t say I’m overly surprised by the share price reaction today.

But when the dust settles I think this could be a buying opportunity for investors. After all, the growth that the company is exhibiting makes Lovisa an attractive option at 27x estimated forward earnings.

And if its expansion in the United States goes to plan, it could put the company in a position to grow its earnings at an above-average rate for years to come.

It is for this reason that I think Lovisa is one of the best options in the retail sector alongside the likes of Noni B Limited (ASX: NBL) and Premier Investments Limited (ASX: PMV).

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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. 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 Scott Phillips.

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