The Lovisa Holdings Ltd (ASX: LOV) share price is starting the week deep in the red.
In morning trade, the fashion jewellery retailer's shares are down over 6% to $30.42.
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Why is the Lovisa share price under pressure today?
The catalyst for today's weakness has been news out of another retailer, Premier Investments Limited (ASX: PMV).
And while Premier Investments has released a trading update this morning, it's not that weighing on the Lovisa share price.
It is actually a separate announcement relating to Premier Investments' Smiggle business which is setting alarm bells ringing.
This morning, it was announced that Smiggle's CEO, John Cheston, has been sacked with immediate effect.
While Smiggle, via its Just Group business, didn't reveal the exact reason for the CEO's termination, it advised that it was for serious misconduct. Its statement, according to Inside Retail, said:
The Just Group board considers that Mr John Cheston has engaged in serious misconduct and a serious breach of his employment terms and on that basis his employment has been terminated today.
How does this impact Lovisa?
In June, Lovisa revealed that its highly regarded CEO, Victor Herrera, would be stepping down from the role next year.
This was a big blow given Herrera's significant experience in growing global brands and his undeniable success with Lovisa's ongoing global expansion.
However, investors were comforted with the knowledge that John Cheston would be leaving Smiggle to join Lovisa and fill the void.
Given that Cheston has successfully taken the Smiggle brand international, investors believed he would be the right man to take the reins at Lovisa.
The big question now is whether the alleged serious misconduct will impact his appointment with the fashion jewellery retailer. And if it does, who will the company turn to next to fill Herrera's very large shoes.
As things stand, Lovisa has not yet commented on the development.
Should you buy the dip?
While this news certainly does throw a spanner in the works, the Lovisa share price decline could have created a buying opportunity.
For example, Morgans currently has an add rating and $36.50 price target on its shares. This implies potential upside of 20% for investors from current levels.
It recently commented:
There are not many global retailers achieving 17% sales growth and 21% EBIT growth in the current challenging consumer environment, but this is exactly what Lovisa did in FY24. A long period of stellar growth has trained investors to have very high expectations for the business and, while its comparable store sales growth should have been better in FY24, it has continued to deliver and will, in our opinion, continue to do so in the years ahead. We maintain our ADD rating.
