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What’s driving the surge in jewellery retailer Lovisa Holdings’ share price in August?

Lovisa shares

Shares in specialist fashion jewellery retailer Lovisa Holdings Ltd (ASX: LOV) have rocketed 18.5% so far in August. In contrast, the All Ordinaries Index (ASX: XAO) went up 2.6% in the same period.

In intraday trading this afternoon, the Lovisa share price was up more than 7% while the All Ords is slipping towards a 1% loss.

Like most Australian retailers, and indeed most Aussie shares, Lovisa was hammered during the COVID-19 market rout in February and March.

From 20 February through to its 19 March low, the Lovisa share price plunged a chilling 79%. Since that low, it has more than tripled, up 202%. But even that meteoric rise hasn’t yet been enough to recoup the losses from the viral sell-off. Year-to-date, the company’s share price is down 38%.

At the current price of $7.37 per share, Lovisa has a market cap of $792 million.

What does Lovisa do?

Lovisa is one of Australia’s leading specialist fast fashion jewellery retailers. Founded by managing director Shane Fallscheer and BB Retail Capital, the first Lovisa store opened in Queensland in 2010.

Today, it has more than 400 stores across Australia, New Zealand, Malaysia, Singapore, Spain, France, South Africa, the United States and the United Kingdom. It also has franchised stores in the Middle East and Vietnam.

The company develops, designs, sources and merchandises 100% of its Lovisa-branded products.

What’s driving Lovisa’s share price gain?

There have been no announcements this month that would directly explain Lovisa’s 18.5% share price gain in August (24.2% since Monday 3 August’s close).

Lovisa did announce some store closures in Victoria and California to comply with lockdown measures following renewed surges in coronavirus infections. It could be that Victoria’s early progress in controlling the spread has encouraged some investors to buy shares at a long-term discount.

Lovisa was also mentioned on several financial news outlets, including Yahoo Finance on 2 and 3 August, mentioning the ‘fantastic 124% total returns’ Lovisa had ‘gifted’ to shareholders.

Lovisa is due to report results for the year ending 28 June to the ASX pre-market open on 26 August. It will be interesting to see how Lovisa’s share price moves following the release of the report.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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