Retail Shutdown Takes Shine Off Lovisa

COVID-19 related lockdowns whacked the 2019-20 revenue and earnings of mass-market jewellery chain Lovisa in the year to June, closing stores, halting sales to the point where nearly 60 stores in its 440-plus global network still closed and the company has decided to exit the Spanish market.

Lovisa said on Wednesday that full-year profit plunged 70% to $11.2 million off the back of a June half dominated by the lockdowns and impact of COVID-19 on sales and consumer confidence here and around the world.

Earnings before interest and tax (EBIT) fell 41.6% to $30.6 million.

The company said that the impact of the pandemic and lockdowns saw revenue down 3.2% to $242 million in the year to June.

No final dividend has been declared, while a delayed interim dividend of 15 cents will now be paid on September 30, albeit at 50% franked instead of being fully franked.

The 15 cents a share for 2019-20 is more than half the 33 cents a share paid in 2018-19.

The market wasn’t impressed and sent the shares down more than 6% to $7.05. They later recovered to close down 1.9% at $7.30 on a day when the ASX lost around 0.7%.

CEO Shane Fallscheer said Lovisa began to see the impact of COVID-19 initially through its Asian markets in early 2020 as economic activity slowed in response to the spread of the virus in China.

The situation escalated to full store closures globally by the end of March.

Stores began reopening in Australia by mid-April, though comparable-store sales still finished the year down 5.5% after being up 2.1% in the six months to December.

Mr. Fallscheer said trading for the first eight weeks of the new financial year had been challenging with comparable-store sales still down 19.0%.

Like so many other companies Lovisa has not provided earnings guidance for the new financial year.

Lovisa said it had scrapped its Spanish store due to poor support from local landlords. The company took a $6.1 million impairment related its exit from the Spanish market – citing poor support from landlords – and a write-down of fixed assets, key money and lease right-of-use assets.

“We continue to focus on opportunities for expanding our store network and have opened eight new stores since the end of the financial year, with the store network currently at 443 stores,” the company said.

There are currently 30 stores in metropolitan Melbourne, 19 stores in California, 2 stores in New York, and 8 stores in NZ closed temporarily due to continued government lockdowns.

There was a small ray of light – Lovisa said the lockdown in the June quarter saw digital sales to jump 382%.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →