One of the biggest movers on the local market today was the Lovisa Holdings Ltd (ASX: LOV) share price.
It finished the day a remarkable 18% higher at $4.52 following the release of its full-year results.
Key highlights include:
- Revenue increased by 16.5% to $178.7 million.
- Comparable store sales growth of 10.3%.
- Gross margin lifted from 73.9% to 78.8%.
- Net profit after tax increased 75.5% to $29 million.
- Earnings per share of 27.7 cents.
- Final fully franked dividend of 7.6 cents per share.
- 38 new stores opened during the year, bringing its footprint to 288 stores.
Overall I can't say I'm surprised to see Lovisa's shares rise so much today. Strong comparable store sales growth, new store openings, and a significant lift in its gross margin all led to the bumper profit result.
The key drivers of its comparable store sales growth were price increases introduced last year and the exit from Australia and New Zealand of one of its major competitors.
Pleasingly, FY 2018 has started strongly for the company. Management has advised that so far in FY 2018 comparable store growth is above its long-term target range of between 3% and 5%.
However, they have noted that over the next few months the company will cycle some particularly successful ranges. I expect this will result in comparable store sales growth moderating as the year goes on.
The top line overall, however, will no doubt receive a boost in FY 2018 from store openings. The company has plans to open a further 20 to 30 stores in FY 2018. Furthermore, the company is open to value enhancing, non-organic growth opportunities.
Should you invest?
Despite the strong gain its shares made today they are still changing hands at just 17x full-year earnings.
I believe this is reasonably undemanding for a company generating such high levels of comparable store sales.
Whilst in the past I was sceptical that it would be able to make such a swift turnaround, I'm happy to admit I was wrong.
In light of its successful turnaround and relatively cheap price, I think Lovisa is one of the better retail investment options on the market alongside the likes of Premier Investments Limited (ASX: PMV) and Noni B Limited (ASX: NBL).
