Lovisa Holdings Ltd (ASX: LOV) shares will have a moment in the spotlight when the company reports its FY24 half-year result. I'm going to look at what the company might report.
It's scheduled to release its results on 22 February 2024.
It has already been a promising reporting season with some retailers like Nick Scali Limited (ASX: NCK) and Temple & Webster Group Ltd (ASX: TPW) beating expectations.
Store growth and recent trading
Lovisa has an increasingly global presence, as it's expanding into new markets regularly. Performance won't necessarily be consistent across the board – for example, the Australian and UK stores may have performed differently.
Lovisa recently revealed that it was going to enter imminently into mainland China and Vietnam, so we might hear about its early performance in those two regions.
The latest we heard about the overall trading performance was announced on 22 November 2023 – it said global comparable store sales for the first 20 weeks of FY24 were down 6.2% year to date, but total sales were up 17% thanks to ongoing store network growth. It said at the time it had opened 35 net new stores for FY24 to date. It had 836 stores across 40 markets – that was 160 more stores and 14 additional markets more than 12 months prior.
What could Lovisa report?
Broker UBS recently decided to reduce its rating on Lovisa shares to neutral, following recent data suggesting slowing store growth compared to the first half and second half of FY23. It's seeing a slowing pace within key shopping centres, which was a major source of growth in FY23. The slowing net new store growth "removes a key revenue driver".
UBS warned that a slowdown of like-for-like (comparable) sales increases the risk of markdowns and operating de-leverage risk, especially as labour and rental costs are forecast to rise.
While UBS doesn't think FY23 revenue growth can be continued in FY24, UBS is forecasting double-digit revenue growth until FY32. The broker also doesn't think the earnings before interest and tax (EBIT) margin can increase in FY24, but it does expect growth in FY25.
Looking at the full 2024 financial year estimates – a retailer's annual performance isn't just based on one half – UBS thinks Lovisa can grow earnings per share (EPS) by just over 10% to 71 cents and grow revenue by 18.5%. The annual dividend per share is projected by UBS to increase by 4.3% to 69 cents.
Lovisa share price snapshot
Using that earnings estimate, Lovisa shares are valued at 36x FY24's estimated earnings. Since the end of November 2023, the Lovisa share price has climbed around 33%.
