Company Reports

Lovisa retails fast-fashion jewelry with a target customer base of fashion-conscious 25- to 45-year-olds. Its supply chain is vertically integrated; Lovisa develops, sources and merchandizes its own products. In fast fashion, speed to market is of the essence. From design to hitting the stores, its takes Lovisa up to 10 weeks and on average, over 100 new product lines arrive in stores weekly. Inventories are monitored daily, and in-demand products can be resupplied within six weeks. From its regional warehouses, most products are distributed by airfreight to reach end markets quickly.

Consumer sentiment is pessimistic in Lovisa's largest markets. Consumer sentiment readings in the US, Australia, and the European Union, together about two-thirds of its stores, are down by the midteens in June year on year. However, retail sales, including fashion spending, are holding up.

Lovisa's first-half sales jumped 23% year on year. The global store rollout is the key growth driver. Like-for-like sales growth was weak, up only 2%. Lovisa is investing in proving a new concept, upmarket jewelry retailer Jewells, in the UK. Shares dropped 13%.

Lovisa retails fast-fashion jewelry with a target customer base of fashion-conscious 25- to 45-year-olds. Its supply chain is vertically integrated; Lovisa develops, sources and merchandizes its own products. In fast fashion, speed to market is of the essence. From design to hitting the stores, its takes Lovisa up to 10 weeks and on average, over 100 new product lines arrive in stores weekly. Inventories are monitored daily, and in-demand products can be resupplied within six weeks. From its regional warehouses, most products are distributed by airfreight to reach end markets quickly.

Lovisa's global store rollout is continuing. The fast fashion jewelry retailer is on track to open over 100 stores in fiscal 2026 after adding 44 stores in the year to date. Total sales are up 26% on the prior year, largely driven by new stores. Same-store sales grew 4%.

Lovisa retails fast-fashion jewelry with a target customer base of fashion-conscious 25- to 45-year-olds. Its supply chain is vertically integrated; Lovisa develops, sources and merchandizes its own products. In fast fashion, speed to market is of the essence. From design to hitting the stores, its takes Lovisa up to 10 weeks and on average, over 100 new product lines arrive in stores weekly. Inventories are monitored daily, and in-demand products can be resupplied within six weeks. From its regional warehouses, most products are distributed by airfreight to reach end markets quickly.

Lovisa's global jewellery sales increased 14% in fiscal 2025, underpinned by a reacceleration of its store rollout. But rising operating costs and spending to support future growth crimped margins, down 100 basis points to 15% pretax. Net profit after tax increased only 5%.

Household incomes are growing in real terms after a period of rampant inflation. With inflation back within the Reserve Bank of Australia’s target range, the focus is shifting to keeping the job market in good shape. Monetary settings are slightly restrictive, providing room for more easing.

Tariffs are softening Australian consumer sentiment and investors are preferring defensive over cyclical retailers. Since sweeping US tariffs were announced April 2, our Morningstar Australia Consumer Defensive Index is up 3%, but the Morningstar Australia Consumer Cyclical Index is flat.

Global markets have been rattled by US President Donald Trump's "liberation day" tariffs. Trump has raised tariff rates to levels not seen in a century, which will likely set in motion a cascade of supply-demand side shocks, all acting to weigh on the rate of economic growth.

Lovisa retails fast-fashion jewelry with a target customer base of fashion-conscious 25- to 45-year-olds. Its supply chain is vertically integrated; Lovisa develops, sources and merchandizes its own products. In fast fashion, speed to market is of the essence. From design to hitting the stores, its takes Lovisa up to 10 weeks and on average, over 100 new product lines arrive in stores weekly. Inventories are monitored daily, and in-demand products can be resupplied within six weeks. From its regional warehouses, most products are distributed by airfreight to reach end markets quickly.

Lovisa's global network increased by 10% in the first half of fiscal 2025, driving total sales growth of 9%. Pretax profits rose by 11% to AUD 81 million on the prior first half. However, adjusting for the positive impact of lower long-term incentives for the CEO, pretax profits grew by only 4%.

Retail spending is rebounding due to a larger workforce, higher wages, and meaningful fiscal stimulus. Discretionary categories are benefiting more than defensives from rising household incomes.

Trading momentum for nonessential goods is picking up. So far in fiscal 2025, sales growth is improving at Super Retail’s chains and Woolworths’ Big W discount department stores, as well as at electronics goods retailers JB Hi-Fi, Harvey Norman, and Kogan.

No-moat Lovisa’s fiscal 2024 net profit after tax of AUD 82 million beat our estimate by 10%, owing to strong gross profit margin and slightly higher sales than we expected. Selective price rises, by product range and market, lifted gross profit margin by 110 basis points to 81%. This together with a material cut in CEO long-term incentive expenses helped mitigate significant labor cost inflation. Compared with the previous corresponding period, pretax margin remained relatively steady, up 30 basis points to 15.8%.

Lovisa retails fast-fashion jewelry with a target customer base of fashion-conscious 25- to 45-year-olds. Its supply chain is vertically integrated; Lovisa develops, sources and merchandizes its own products. In fast fashion, speed to market is of the essence. From design to hitting the stores, its takes Lovisa up to 10 weeks and on average, over 100 new product lines arrive in stores weekly. Inventories are monitored daily, and in-demand products can be resupplied within six weeks. From its regional warehouses, most products are distributed by airfreight to reach end markets quickly.

The upcoming August 2024 reporting season will draw the line under a difficult year for Australian retailers in which they navigated soft demand and soaring labor costs. The combination results in a profit margin crunch and declining earnings for many retailers.

Talk of interest rate cuts and impending tax cuts is sparking a rally in consumer cyclicals. We agree these factors improve the near-term outlook for consumer spending, with cyclical retailers more exposed. We expect the combined impact of fiscal and monetary tailwinds to underpin mid-single-digit growth in total retailing sales in the medium term—compared with our estimate of only 2% growth in fiscal 2024. But underlying our near-term forecast is a significant divergence across categories, with sales in cyclicals virtually flat and defensives up 4%.

Lovisa retails fast fashion jewelry with targeted a customer base of fashion-conscious 25- to 45-year-olds. Its supply chain is vertically integrated, and Lovisa develops, sources and merchandizes its own products. In fast fashion, speed to market is of the essence. From design to hitting the stores, its takes Lovisa up to 10 weeks and on average, over 100 new product lines arrive in stores weekly. Inventories are monitored daily, and in-demand products can be resupplied within six weeks. From its regional warehouses, most product is distributed by airfreight to reach end markets quickly.

No-moat Lovisa’s gross profit margins are expanding, successfully raising prices without materially affecting demand for its fast-fashion jewelry. We were previously expecting gross margins to weaken in fiscal 2024.