One promising ASX retailer you've never heard of

Lovisa Holdings Ltd (ASX:LOV) reports strong growth in revenue and earnings, but who's heard of the company?

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published February 9, 2015 12:52 pm AEDT

Virtually every investor knows about the big ASX-listed retailers, but there are several not so well-known retailers that could be worthy of adding to your watchlist.

The bigger retailers include the likes of Myer Holdings Limited (ASX: MYR), Harvey Norman Holdings Ltd (ASX: HVN), Woolworths Limited (ASX: WOW) and Wesfarmers Ltd (ASX: WES) – owner of Coles, Bunnings, Officeworks, Target and KMart.

But not many investors would have heard of Lovisa Holdings Ltd (ASX: LOV), RCG Corporation Limited (ASX: RCG), PAS Group Ltd (ASX: PGR), Beacon Lighting Group Limited (ASX: BLX) or Grays eCommerce Group Ltd (ASX: GEG). And that's despite the fact that many of us familiar with their stores or websites. Beacon Lighting, Diva jewellery, Athlete's Foot, Grays Online, DealsDirect and TopBuy are just some of their brands.

And then you have more obscure retailers like Burson Group Ltd (ASX: BAP), Greencross Limited (ASX: GXL) and Vita Group Ltd (ASX: VTG). Burson does aftermarket auto parts, Greencross diversified away from being a pure veterinary services brand and now generates most of its revenue from the Petbarn chain of pet stores, and Vita Group runs most of Telstra Corporation Ltd's (ASX: TLS) retail stores.

With the RBA cutting the cash rate last week and the banks passing on the cut to mortgage rates, consumers now have more cash in their pockets – good news for retailers. And with the price of petrol falling dramatically, even more cash is being given to consumers.

Now unless we all stuff those savings into our mortgages – as has been known in the past – retailers should see consumers spending more.

Lovisa who?

Of the companies mentioned above, Lovisa Holdings looks very promising. The company is a fast fashion jewellery retailer – most of its products are priced between $7 and $50. Lovisa has 220 stores in 8 countries with 157 in Australia – and 88 of those were Diva stores, currently being converted to the Lovisa brand.

The company today reported strong growth in revenues and net profit. A 66% rise in first-half profit on the back of a 33% increase in sales is an excellent performance, given the weak conditions. The prospectus issued in November 2014 noted same-store sales growth of 11.7% so far in the 2015 financial year.

At current prices, Lovisa is trading on a prospective P/E ratio of 15.1x and expects to pay a fully franked dividend of around 4.5%.

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