Lovisa Holdings Ltd (ASX: LOV) is the listed company behind the popular jewellery chain Lovisa. Having listed via initial public offering in December 2014, the share price has since been on a wild ride.
After floating at an offer price of $2 a share, the stock raced higher and by July 2015 it reached a high of $3.79. The stock remained in the $3 to $3.50 range until January 27 when the group issued profit guidance which was well below market expectations. The share price subsequently plunged to a low of $1.96 and currently remains around the $2 level.
With the share price having rebased, the group's financial results for the six months ending December 27 are worth a look by value hunting investors. Here are the key points from the interim report:
- Revenue increased 13% to $82.6 million
- Earnings before interest and tax (EBIT) grew 3% to $17.9 million
- Net profit after tax expanded 8% to $13.5 million
- The partially franked interim dividend remained flat at 6.67 cents per share
- Lovisa achieved like-for-like store sales growth of 4.1% on a constant currency basis
- Store numbers increased by 12 to 251 including 82 stores located outside of Australia. These overseas stores contributed 34% of revenue for the half
Sparkling opportunity?
One of the best times to buy a retailer with a proven business model is during the early stage of its store roll-out. Lovisa already has expansion footprints in New Zealand, Singapore, Malaysia, South Africa and the Arabian Gulf. The company also recently opened its first store in the UK with plans for a significant roll-out there.
Lovisa has provided guidance for full year EBIT of between $23.5 million and $25.5 million which suggests the stock is currently trading on an undemanding multiple of around 12 times. That's attractive on a relative basis compared with other retail sector peers such as Pacific Brands Limited (ASX: PBG) on a multiple of around 17 times, Myer Holdings Ltd (ASX: MYR) on nearly 13 times and Premier Investments Limited (ASX: PMV) on 20 times. (Source: Thomson Consensus Estimates)
