The Lovisa Holdings Ltd (ASX: LOV) share price will be one to watch on Friday after the release of a business update.
What did Lovisa announce?
According to the release, the fashion jewellery retailer's performance in the fourth quarter was unsurprisingly below expectations because the closure of stores during the pandemic.
And despite an impressive 256% increase in online sales during the quarter, it wasn't enough to stop its full year sales declining in comparison to FY 2019. Sales revenue (excluding franchise revenue) for the full year ended 28 June 2020 came in at $237 million. This represents a 4.8% decline on FY 2019's sales revenue of $249 million.
Same store sales declines.
In addition to the above, the company revealed that comparable store sales for the period since stores have re-opened, based on the actual days each store traded, were down 32.5% on last year.
Looking ahead, management warned that forecasting trading conditions remains challenging and no guidance will be provided at this stage.
Spain exit.
After previously putting its store rollout on hold in Spain, Lovisa has made the decision to exit this market.
Management explained that it was disappointed with the lack of support from its landlords in the country.
As a result of this exit, Lovisa expects to recognise an impairment charge of $3.3 million in its FY 2020 results.
Balance sheet remains strong.
One positive is Lovisa's balance sheet strength. Thanks to decisive action taken on costs and cash management since the outbreak of the pandemic, its balance sheet position remains strong and its inventory levels are well managed.
At the end of the financial year, Lovisa had a net cash balance of $21 million. This is $10 million more than this time last year.
Management notes that this cash balance, combined with undrawn financing facilities of $44 million, leaves it well placed to invest in future growth opportunities as the global economy emerges from the current situation.
