The Lovisa Holdings Ltd (ASX: LOV) share price climbed over 5% in today's early trade after the retailer released a business update last night. Lovisa was forced to close stores globally as a result of the COVID-19 pandemic but has now re-opened and reported a surge in online sales during Q4 FY20.
What does Lovisa do?
Lovisa is a fast-fashion jewellery and accessories retailer with over 400 stores globally. The company has a target customer base of fashion-conscious females aged 25-45. Operating a vertically integrated business model, Lovisa develops, designs, sources, and merchandises 100% of its Lovisa-branded products. Founded in 2010, Lovisa expanded rapidly, opening store No. 51 on the company's first year of operation.
What did Lovisa report?
Lovisa announced that stores have now re-opened in all company-owned markets, with the company trading from 434 stores at the end of FY20. Store closures significantly disrupted Q4 FY20 sales. Lovisa's sale revenue (excluding franchise revenue) was $237 million for the full year ended 28 June 2020 compared to $249 million in FY19.
Comparable sales for the period since stores have re-opened were down 32.5% on the previous year. Performance has been strongest in Australia and New Zealand where stores have traded the longest after an ease in restrictions. Lovisa reported online growth of 256% during Q4, with trading websites now operational in most of its markets.
How is the Lovisa share price performing?
The Lovisa share price dived 80% from a high of $12 in February to a low of $2.45 in March. Since then the Lovisa share price has gained 160% with shares currently trading at $6.40. Lovisa took action to manage the cost structure of its business following the temporary closure of the store network. This included temporary stand-downs and redundancies, as well as discussions with landlords in relation to rent subsidies and abatements. As a result, the balance sheet remains strong with current net cash of $21 million, compared to $11 million at June 2019.
In 1H FY20 Lovisa opened a net 49 stores, growing revenue by 22% and net profit after tax by 9.1%. With the trade disruptions taking place in 2H FY20, it's unlikely Lovisa can replicate these results over the full year. Nonetheless, the company is well-placed to invest in future opportunities as the economy emerges from the coronavirus.
