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Why the Lovisa (ASX:LOV) share price is dropping lower today

Lovisa shares

The Lovisa Holdings Ltd (ASX: LOV) share price is edging lower on Tuesday following the release of a trading update.

At the time of writing the fashion jewellery retailer’s shares are down 1% to $8.60.

How is Lovisa performing in FY 2021?

According to the release, Lovisa’s global comparable store sales are still down financial year to date but have been improving in recent weeks.

For the first 16 weeks of FY 2021, its global comparable store sales are down 10.2% on the prior corresponding period.

This is a big improvement on the 19% decline during the first 8 weeks of the financial year. Which itself was a big step in the right direction after a 32.5% decline in comparable store sales during the final quarter of FY 2020.

Management notes that the company has continued to see a stronger performance from those markets that have been re-opened longest and with the least restrictions in place, Australia and New Zealand continues to be its best performing regions.

And while all its European stores remain open at present, it acknowledges that there has been a large increase in COVID-19 cases across a number of markets over the past few weeks. It continues to monitor these situations.

Store expansion continues.

Speaking of stores, COVID-19 hasn’t stopped the company from adding to its network. There are currently 449 stores in the global Lovisa store network, with 14 net new stores opened since the end of FY 2020.

The only stores that are currently closed are its 30 stores in metropolitan Melbourne. They have been closed since 6 August and are expected to reopen again in November.

Management also plans to keep rolling out its stores.

It commented: “Our strategic plans remain in place, we are ready to continue our store roll out and we continue discussions with our landlords globally as we believe current circumstances will create further opportunities for expansion of our store network, which will be supported by our strong balance sheet with a continued net cash position and undrawn cash debt facilities available to support our ongoing investment in growth.”

Online sales explode.

One big positive during FY 2021 has been the performance of its online business.

Management revealed that total online sales are up over 400% for the first 16 weeks of the financial year compared to the prior corresponding period. Though, this is admittedly from a relatively small base. 

It advised that execution online remains a key focus to ensure it can become a meaningful part of its business. Digital store fronts are now in place servicing all eight of its major markets around the world.

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Returns as of 6th October 2020

Motley Fool contributor James Mickleboro 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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