Shares in jewelry retailer Lovisa fell more than 20% yesterday after it revealed its strong sales growth momentum of the past four years had come to a sudden halt in the early weeks of the 2018-19 financial year.
The sell-off by nervy investors echoed that on Monday when weak news in an update from Kogan.com saw its shares plunge a third, while a couple of weeks ago shares in the Reject Shop plunged 38% on a very weak trading update for the first half (to the end of December). AMP shares also sold off last week by around a quarter on an unconvincing asset sale
A glum trading update at yesterday’s annual meeting from CEO, Shane Fallscheer saw the shares plunge to a 10 month low of $6.52 before staggering back to end down 18% at $6.85.
There was no afternoon rebound as there was for so many other shares yesterday.
Mr. Fallscheer told shareholders “we have had four years of very strong [comparative] sales growth on the back of great execution of some major trends in the fashion accessories market.”
“As a result, comp sales in the current year will be more challenging as we cycle these strong numbers, and year to date we have traded below our long-term target range of 3 to 5 percent, with comps for the year to date at -0.9 percent”.
“We remind everyone that both Spring Racing and especially Christmas are still to come and play a very large part of both our first half and full year’s performance, and we continue to remain acutely focused on ensuring that our strong gross margins are maintained and costs remain well controlled as we invest in the future growth of the business.
“We have continued our global expansion in the first part of FY19, with 340 stores now trading globally, a net increase of 14 from the end of FY18. We have a strong pipeline of new stores in progress and expect to be trading from at least 360 stores as we go into Christmas which will include at least 7 stores trading in each of the US, France, and Spain.
“Given this, we are also confident that the net increase in store numbers for the full year will be higher than that delivered in FY18, he said.
Lovisa is 41% owned by Brett Blundy’s BB Retail Capital fund. Mr. Blundy became chairman of Lovisa at the end of yesterday’s annual meeting.
In April Shares in Lovisa fell sharply on April 20 after then CEO, Steve Doyle quit and left the company immediately. It was the second loss of a senior executive in a matter of months as Chief Financial Officer, Graham Fallet left in September 2017.
Yesterday’s loss took the fall in the past three months to nearly 40% and the shares are now steady over where they started the year.
Doyle’s departure comes after the resignation of former chief financial officer Graeme Fallet last September after just one and a half years with the business.
2017-18 gross margin increased to 80.0% up from 78.8% in the prior fiscal year. (and 79% on a constant currency basis).
Besides the sale data (topline and same-store or like for like) the gross margin will be the figure to watch when the company reports its 2018-19 interim figures next February or provides any further trading updates between now and then.
