Lovisa Holdings Ltd (ASX: LOV) shares are having a forgettable day on the market. At the time of writing, Lovisa shares are changing hands for $22.46. That's nearly 6% lower than yesterday's closing price.
This comes after US President Donald Trump unveiled reciprocal tariffs in the early hours of this morning.
As my colleague Bernd Struben covered this morning, markets have reacted negatively to the news. While tariffs were expected, their magnitude appears to be worse than anticipated, rattling markets.
Is Lovisa's sharp decline related to tariffs? Unlike Cochlear Ltd (ASX: COH) and Breville Group (ASX: BRG), Lovisa did not release an ASX announcement detailing its tariff impact.
Let's investigate further to see whether they are related.
Lovisa's tariff exposure
In recent years, the US has become a critical market for Lovisa as it executes its international growth story. While Lovisa is an Australian company, 209 out of a total of 943 stores are now located in the United States.
However, Lovisa's products are primarily sourced from China. This makes it vulnerable to any tariffs on goods originating from that country.
This morning, Trump announced that tariffs on goods from China would rise by a further 34% to 54%, adding to the existing 20% levy.
Is Lovisa a buy or a sell?
There's no doubt Lovisa's profitability could be negatively impacted by Trump's tariffs. Either the company will need to absorb the levy or pass it on to consumers. As a discount retailer, this is particularly bad news for Lovisa. Higher prices are likely to weigh heavily on demand.
However, the good news is that Lovisa remains geographically diversified. Fortunately, its products appear to be popular around the globe, allowing it to focus on other regions outside the US if required. While nearly a quarter of its stores are in the US, it operates in over 45 countries, including Australia, Canada, the United Kingdom, the United Arab Emirates, and Mexico.
In fact, during the most recent half, Europe delivered the largest share of new store growth, with 25 stores opened, including 5 in Ireland, 4 in the UK and 5 each in France and Germany. The Canadian market also had a strong half, with 9 new stores opening during the period.
Lovisa's share price is also down nearly 40% from its peak. It is often named by leading brokers as a top buy recommendation. If you think Lovisa's tariff impact is overblown, this could be a great opportunity to secure this ASX retailer at a discount.
