Why are Lovisa shares sinking 10% on a green day?

The exit of a highly regarded CEO is weighing on the retailer's shares.

| More on:
A businesswoman exhales a deep sigh after receiving bad news, and gets on with it.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The market may be pushing higher today, but the same cannot be said for Lovisa Holdings Ltd (ASX: LOV) shares.

At the time of writing, the fashion jewellery retailer's shares are down a sizeable 10% to $30.58.

Why are Lovisa shares sinking?

Investors have been heading to the exits today after the company announced that its CEO, Victor Herrero, will be stepping down from the role next year.

According to the release, Herrero has agreed to an amended employment contract through to 31 May 2025.

After which, the highly regarded CEO will be replaced by John Cheston, who will join the company on 4 June 2025.

Why the reaction?

While CEO exits often receive poor reactions from investors, Lovisa shares are falling particularly heavily today. This is because the appointment of Victor Herrero was a real coup for the company and a key reason why many invested (myself included) in the company.

The outgoing CEO has been instrumental in Lovisa's global expansion. And while a lot of the hard work has certainly been done since his arrival in 2021, there's still a lot more to come. The market may be concerned that his exit now puts at risk the successful execution of this expansion.

Herrero joined Lovisa having spent 13 years with the Inditex Group, which is one of the world's largest fashion retailers (Zara, Pull & Bear and Massimo Dutti). During his time at Inditex, he held numerous roles including Head of Asia Pacific and Managing Director Greater China and led the company's expansion through this region rolling out 800 stores across multiple countries including China and India.

After which, Herrero spent four years as CEO of Guess, and was then the chairman and CEO of international shoe manufacturer and retailer Clarks.

The good news is that Lovisa's chair, Brett Blundy, remains positive on the future and was pleased with the appointment of John Cheston. He said:

The Board and I are pleased to announce that Victor has entered an amended 12-month contract. The Board and I are also pleased to announce that John Cheston will join us as CEO and Managing Director on the 4th of June 2025. John is a highly successful Global retailer and will join Lovisa at a very exciting time as we continue our global growth.

Cheston is currently the CEO of Smiggle, which is owned by Premier Investments Limited (ASX: PMV). Its shares are down on the news of his departure from the role.

Given that Smiggle has also been successfully expanding internationally in recent years, Cheston appears to be a worthy CEO of Lovisa and should be able to pick up where Herrero leaves off.

Motley Fool contributor James Mickleboro has positions in Lovisa. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Lovisa. The Motley Fool Australia has recommended Lovisa and Premier Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Consumer Staples & Discretionary Shares

Stock market crash concept of young man screaming at laptop on the sofa.
Share Fallers

Guess which ASX 200 stock just crashed 31% on slumping sales

The $1.3 billion ASX 200 stock is getting hammered today.

Read more »

Photo of a happy couple with their new car and car keys.
Consumer Staples & Discretionary Shares

Up 55% this year, why Macquarie believes Eagers Automotive shares can charge higher

Eagers set to capitalise as BYD’s Australian sales surge.

Read more »

Two race cars on a track at sunset.
Consumer Staples & Discretionary Shares

Down 36% in a year, this ASX 300 stock is one to watch

After a major sell-off, this high-performance cooling specialist might be gearing up for a turnaround.

Read more »

Two laughing young women hold shopping bags and ride an escalator up to another level in a Scentre Group shopping centre.
Broker Notes

3 ASX consumer sector shares to buy in July: expert

A leading expert has named its top 3 picks.

Read more »

person with large headphones looking puzzled holding their hand to their chin.
Broker Notes

Does Macquarie prefer Harvey Norman or JB Hi-Fi shares?

Both companies have market-beating long-term track records.

Read more »

Person taking out a slice of pizza from a pizza box.
Consumer Staples & Discretionary Shares

Why now is the time to buy the big dip on Domino's shares

Down 46% in a year, a leading expert forecasts brighter days ahead for Domino’s shares.

Read more »

Three people sit on safe cheering with pizza on table
Consumer Staples & Discretionary Shares

Food fight! Have Guzman Y Gomez shares outperformed Domino's since ASX debut?

Lets find out who’s topping the menu for investors

Read more »

Woman chooses vegetables for dinner, smiling and looking at camera.
Consumer Staples & Discretionary Shares

Here's the Coles dividend forecast from top analysts through to 2029

Can this defensive business provide pleasing payouts? Let’s take a look…

Read more »