Lovisa (ASX:LOV) share price leaps 18% higher on FY21 profit boost

The ASX jewellery retailer released its full-year financial results this morning.

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The Lovisa Holdings Ltd (ASX: LOV) share price is leaping higher today, up 18.19% at the time of writing to $19.40 per share.

This comes following the release of the ASX jewellery retailer’s financial results for the year ending 30 June (FY21).

Lovisa share price leaps on FY21 profit results

  • Revenue of $288 million, up 18.9% from FY20
  • Earnings before interest, taxes, depreciation and amortisation (EBITDA) increased 34.6% year on year to $60.2 million
  • Net profit after tax (NPAT) of $27.7 million, up 43.3% from the $19.3 million reported in FY20
  • Net cash of $35.6 million, up from $20.4 million in FY20
  • Declared a final dividend of 18 cents per share (cps); no final dividend was paid in FY20

What happened during the reporting period for Lovisa?

Like most ASX retailers, Lovisa reports that it was “heavily impacted” in the first quarter of the financial year by COVID-19 restrictions. It pointed to store closures in Victoria and weakness in most of its global markets as hampering operations in Q1.

Things turned around in the second quarter with Lovisa’s Victorian stores reopening and “most other markets showing improved performance.” This led to positive comparable store sales through the second quarter. However, more closures later in the year, particularly in the United Kingdom, continued to impact operations.

COVID also slowed sales in its Asian markets, with tourism numbers way down. And it added to costs, with “significantly higher freight costs due to COVID surcharges on freight rates.”

The company’s beeline acquisition (of a European retail store network) in November aided its cash flow position. It benefitted from the receipt of 11.8 million euro cash as part of the acquisition.

During the financial year, Lovisa opened 22 stores in its existing markets and 87 stores in Europe as part of its beeline acquisition. That brings the total number of stores to 544.

The final dividend lifts the full-year dividend payout to 38 cps.

What did management say?

Lovisa managing director Shane Fallscheer commented on the results:

We are pleased with the performance of the business for the year, in particular with the sales performance we saw across most markets since the end of Q1FY21 with solid trading despite the continued global challenges we face with the impact of COVID.

The strength of our balance sheet and the current global footprint puts us in a great position to take advantage of future opportunities as they arise.

What’s next for the Lovisa share price?

Lovisa said it will continue to focus on expanding its physical and digital store networks.

With the resurgent pandemic, it cautions that “logistics capacity challenges” will hinder bricks and mortar store openings.

Management did not provide guidance on future dividend levels. It said “profitability, cash flows, and future growth capex requirements” will determine this. The company said that due to the uncertain outlook for the global economy, it could not provide further guidance.

The Lovisa share price is up 150% over the past 12 months.

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The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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