Shares in jewellery retailer, Lovisa (LOV), fell 8% at one stage yesterday after it once again disappointed investors with a weak result.
It’s not the first time this year the company has attracted the ire of investors.
Lovisa is 41% owned by Brett Blundy’s BB Retail Capital (he owns the Bra’s and Things chain among others), and in January, the shares went from $3.60 to $2 in a day after a profit warning but recovered to around $3.00 before yesterday’s profit announcement and slide.
They later recovered lost ground to end at $2.91, down 3% on the day and well above their float price of $2 back at the end of 2014.
But life seems to be getting rougher for the one time high flier. Lovisa yesterday sliced its final dividend after a 46% plunge in net profits to $16.5 million for the 2015-16 year.
Earnings before interest and tax fell 6% to $24.2 million, in line with the company’s revised $23.5 million and $25.5 million guidance in January’s downgrade, which followed the weaker than expected Christmas and December-half result.
While sales jumped 14% to $153.5 million, boosted by 43 new stores and solid same-store sales growth of 5.5%, gross margins fell from 77% to 74% as the retailer discounted heavily in the December half to shift slow-moving stock.
A combination of the weaker Aussie dollar and slow moving stock meant the company was forced to cut margins by discounting the unsold product.
Lovisa trimmed its final dividend from 4.07 cents a share to 2 cents a share.
The company says the problems of the first half are now behind them with “disciplined inventory management’ returning inventories to “normalised levels at year end.”
Looking to the rest of the year directors said the company would be opening 20 to 30 new stores over 2016-17 (including the new Vietnamese pilot store), Australia, South Africa and the UK.
The company said it expects same store sales to growth at previous levels of 3% to 5%, with gross profit margins back around 75%.
