This ASX 300 retail share could grow its global store network by 260%: fundie

A woman wearing a top of gold coins and large gold hoop earrings and a heavy gold bracelet stands amid a shower of gold coins with her mouth open wide and an excited look on her face.

A woman wearing a top of gold coins and large gold hoop earrings and a heavy gold bracelet stands amid a shower of gold coins with her mouth open wide and an excited look on her face.

One fund manager has picked out an S&P/ASX 300 Index (ASX: XKO) retail share that he reckons could grow its global store network by a significant amount.

That ASX share is affordable jewellery retailer Lovisa Holdings Ltd (ASX: LOV).

Monash Investors co-founder Simon Shields shared the opinion on Livewire, saying Lovisa was his pick as a company to buy and hold for five years. He said:

There’s still a very long store rollout underway in the US and Europe – from 550 stores currently we could easily see 2000 over the next seven to eight years.

The earnings numbers will go up and the share price will follow.

Shields said he believed Lovisa was a “bargain” that would offer good value, even if its share price were to fall a bit further. Lovisa shares were trading 4.43% higher at $14.15 at the close on Thursday.

What is the attraction of Lovisa?

Lovisa is set up with a vertically integrated model, meaning it owns its own product and brand. The company claims to have a significant cost advantage through direct sourcing from factories, with products manufactured in cost-optimal locations such as China, Thailand and India.

According to the ASX 300 retail share, the company has a strong focus on data analytics for inventory management, with a business model that underpins “consistently high gross margins” of more than 75%.

Lovisa noted in an investor presentation that it has a central buying team, which is “highly responsive” to fashion and sales trends with “proven success” in bringing new products to the market that are on-trend.

The ASX 300 retail share has built global logistics infrastructure to help fulfil its growth ambitions. It has logistics hubs in Melbourne, China and Poland, with dedicated e-commerce warehouses in the United Kingdom, the United States and South Africa.

In terms of its store network, management is focussing on international rollout. It has opened 59 new stores in the year to April 2022. In the US, it has opened 38 new stores in the year to date, and it’s now trading from 31 US states.

Lovisa notes that a global leasing team is in place to drive growth from existing and new markets.

Future outlook

When outlining its future, Lovisa said that it was working on the continued expansion of its current markets with the same “successful disciplines” and criteria used to date. It’s also investing in the team to stay ahead of the growth curve and build global capability.

Lovisa is also continuing to focus on digital platforms to help its online sales.

The ASX 300 retail share is aiming to identify new markets to pilot its Lovisa brand.

Trading update

The company noted that trading in the first eight weeks of the FY22 second half saw store sales for that period rise 12.1% compared to the same period in FY21. Total sales were up 61.7% over the same period in FY21.

Lovisa says that the sales momentum has continued through the second half to date to the end of April.

The post This ASX 300 retail share could grow its global store network by 260%: fundie appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Lovisa Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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