Lovisa Holdings Faces Share Price Drop Despite Profit Growth

Highlights:

• 21% Profit Growth: Lovisa Holdings Ltd (ASX: LOV) achieved a 21% increase in net profit to AUD 82.4 million in FY24, alongside a 17.1% rise in revenue to AUD 699 million.
• Global Expansion: The company expanded its footprint by opening 128 new stores, bringing the total to 900 stores across 46 markets, while also enhancing its online presence.
• Increased Operating Cash Flow: Lovisa's operating cash flow grew by 27.6% to AUD 240 million, with a 110 basis point improvement in gross margin, reaching 81.0%.

FY24 Profit Growth Fails to Sway Investors

Lovisa Holdings Ltd (ASX: LOV) reported a strong financial performance for FY24, showcasing a 21% increase in net profit to AUD 82.4 million and a 17.1% rise in revenue to AUD 699 million. Despite these impressive figures, the company's share price took a hit, plunging over 15% to AUD 31.066 on Tuesday. Investors appeared unconvinced by the growth, focusing instead on other market dynamics.

Operational Highlights and Strategic Expansion

Lovisa continued its aggressive expansion strategy in FY24, opening 128 new stores across various global markets, bringing its total to 900 stores in 46 countries. The company also improved its gross margin by 110 basis points, reaching 81.0%. Earnings before interest and tax (EBIT) rose by 21.2% to AUD 128.2 million, while operating cash flow increased by 27.6% to AUD 240 million. The Board declared an unfranked final dividend of 37 cents per share.

Digital and Physical Growth

In addition to physical store expansion, Lovisa made significant strides in its online presence. The company established itself on major e-commerce platforms like Tmall, ASOS, and The Iconic, reinforcing its strategy to become an omni-channel retailer. A new 5,000 square meter warehouse was opened in Columbus, Ohio, to support its growing business in the Americas.

CEO's Outlook and Future Plans

CEO Victor Herrero expressed satisfaction with Lovisa’s performance, emphasizing the company's strong sales, gross margin, and profit growth. He highlighted the ongoing global expansion and the company’s readiness to enter new markets. Despite the recent dip in share price, Lovisa remains focused on growth, with 10 new stores already opened in the first eight weeks of FY25, contributing to a 13% increase in sales compared to the same period last year.

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