Shares in Lovisa Holdings Ltd (ASX: LOV) have fallen about 20% since the company reported its full-year result, creating a buying opportunity, according to the team at UBS.
UBS has released a new research note on the company with a bullish share price target, which I'll get to shortly.
First, let's have a look at Lovisa's full-year results.
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Profit and revenue heading in the right direction
The jewellery retailer boosted total revenue 17.6% to $938.8 million, while comparable store sales were up 2%.
The company opened 160 new stores during the year, to have 1136 at the end of June.
Net profit came in at $95.6 million, up 10.7%, while the dividend was increased 22.2% to 33 cents per share.
Lovisa Chief Executive Officer John Cheston said of the result:
Lovisa has once again been able to deliver strong global sales and profit growth, with the highlights being continued growth in the Americas and Europe and another exceptional Gross Margin performance. I would like to share my appreciation to the global team for their hard work in delivering these outstanding results and continuing the global momentum of the business.
Lovisa said its ongoing focus on the quality of the store network resulted in 43 underperforming stores being closed and 12 relocations.
The company added:
We will continue to focus on store profitability and where landlords don't provide a profitable rent we will take action on stores not delivering to required levels of return on investment. With a footprint now in over 50 markets and increased support structures in place we are well positioned to continue our global rollout across both existing and new markets. We continue to focus on opportunities for expanding both our physical and digital store network, with structures in place to drive this growth in existing and new markets and formats, with a long new store runway supporting continued store rollout momentum. Our balance sheet remains strong with available cash and debt facilities supporting continued investment in growth.
Lovisa shares looking cheap
UBS said with the share price having weakened, the risk-reward for the shares "is now attractive and we upgrade our rating from neutral to buy".
UBS added:
LOV enjoys significant store growth potential assisted by a consistent format across markets while leveraging a low ticket price and socialisation by a predominantly youth consumer base, typically a stronger consumer cohort. Store growth, the key EBIT driver, was strong in FY26 (160 gross, 12 relocations, 43 closures) with this expected to continue in FY27.
UBS has a price target of $28 on Lovisa shares compared to $23.07 at the time of writing.
Lovisa is valued at $2.4 billion.
