Lovisa Holdings Ltd (ASX: LOV) shares started the week on a positive note.
The ASX 200 share ended the session 2% higher at $21.42.
This was despite Bell Potter making a major downgrade to its valuation.
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What did the broker say about this ASX 200 share?
Bell Potter has been reviewing Lovisa's performance in FY 2026 and has made downward revisions to its estimates. It said:
Lovisa Holdings (LOV)'s 1H26 result back in February saw revenue beats to BPe, however misses in both EBIT and NPAT on a group basis (core Lovisa brand + new global brand, Jewells) vs BPe. The trading update for the first 7 weeks of 2H26 saw total sales +21.5% on pcp and global comparable sales +1.6% on pcp (vs +2.2% in 1H26) tracking softer than BPe.
The strong performance in the US/UK markets of 30- 40% revenue growth on pcp has been offset by a weaker than expected performance (vs BPe) in the core ANZ market with a ~5% decline on pcp during 1H26. Net new stores of 64 driven by 85 openings & 21 closures and total stores at 1,095 was a miss to BPe (however in line with Consensus), however with UK the standout region adding 14 new stores.
In response, Bell Potter has downgraded its net profit estimates by double-digit percentages through to FY 2028. It adds:
We factor in the misses to our comparable sales growth (2H to-date), EBIT and operating cost base (in 1H26) and we continue to include the Jewells brand within our underlying forecasts ($2.5m in revenue and $10.8m in losses in 1H26). Our revised forecasts see global total sales growth of ~19% in 2H26 and ~21% in FY26e (on pcp). The net result sees our NPAT forecasts -11%/-11%/-10% for FY26/27/28e.
New price target
According to the note, the broker has retained its hold rating on the ASX 200 share with a price target of $24.00 (from $33.50).
This implies potential upside of 12% for investors over the next 12 months. In addition, a dividend yield of 3.6% is expected over the period, stretching the total potential return beyond 15%.
Commenting on its hold recommendation and sizeable valuation downgrade, Bell Potter said:
Our Target Price decreases by 28% to $24.00 (prev $33.50). Along with our earnings downgrades, we reduce our target P/E multiple to ~29x (prev. 32x) on a blended FY26/27e basis to reflect the de-rating in the sector. We highly rate LOV's strong gross margin outlook, long term store opportunity upside, further prospects arising from changes in the competitive dynamics in US/UK/South Africa, together with strong execution and leadership.
On the flipside, we see elevated risks within the core Australian market with a fast-growing competitor and factor in further declines in comparable store sales for the region. However, we see some of these risks offset by the strong performance in the US/UK with better efficiencies within the North American store network and continuing growth in new stores within UK supported by the exit of key competitor as somewhat evident in the 1H26 result. Overall, we remain cautious considering the current weak consumer environment, potential costs related to the broader group's new brand growth initiatives and also investments into market share & store refits to mitigate competitive pressures in key markets.
