Lovisa Holdings Limited saw its shares plummet 13.2 per cent after releasing first-half statutory results that fell short of market expectations. According to RBC Capital Markets analyst Wei-Weng Chen, the results disappointed despite underlying earnings actually beating consensus estimates. Lovisa is a global fashion jewellery and accessories brand, operating a retail network of stores. The company aims to deliver on-trend fashion jewellery at ready-to-wear prices.
The discrepancy in the results was attributed to the removal of a $10.8 million EBIT loss from the Jewells brand. Management stated that Jewells is still in its start-up phase. However, Chen noted that investors are likely to view this adjustment with scepticism. Typically, Lovisa does not make such accounting adjustments. Furthermore, Jewells’ FY25 losses were already included in last year’s accounts, and consensus estimates had already factored in the brand’s performance.
The analyst highlighted the materiality of the adjustment, which represents around 10 per cent of EBIT. This adjustment significantly impacted the overall financial results. Adding to investor concerns, comparable store sales have experienced a slowdown. Sales decreased from 3.5 per cent at the annual meeting to 2.2 per cent in the December half and further to 1.6 per cent in the first seven weeks of the June half.
The combination of the accounting adjustment and slowing sales growth has raised concerns among investors regarding Lovisa’s future performance. This led to a significant sell-off of shares. Investors are now closely watching for the company’s response and strategies to address these challenges.
