Why is this $3 billion ASX retail stock rocketing 19% today?

ASX retail stock Lovisa Holdings Ltd (ASX: LOV) is rocketing 19% to $29.22 on Wednesday morning, taking its monthly gain to 35%.

Despite the surge, the jewellery retailer remains 22% lower over the past 12 months, while the S&P/ASX 200 Index (ASX: XJO) has gained around 2%.

So, what’s driving today’s dramatic rebound?

Lovisa delivers another strong year

Investors are responding to a solid full-year result, with Lovisa delivering growth across its key financial metrics. Total revenue increased 17.6% to $938.8 million, while comparable-store sales rose 2.0%.

The ASX retail stock also lifted earnings before interest and tax (EBIT) by 14.1% to $158.2 million. Net profit after tax climbed 10.7% to $95.6 million.

Lovisa generated $294.5 million in operating cash flow, up 21.0%, demonstrating the company’s ability to fund its expansion while continuing to generate substantial cash.

Shareholders also received a boost, with the full-year dividend increasing 11.7% to 86 cents per share.

Global expansion remains a key growth driver

Lovisa continued its aggressive international expansion during the year, opening 160 new stores and finishing with 1,136 stores across more than 50 markets. Europe was the standout region for store growth, with 76 new locations added, including 34 in the UK and 20 in Germany.

However, management isn’t simply opening stores for the sake of growth. Lovisa closed 43 underperforming locations and relocated another 12, highlighting its focus on improving store profitability and optimising its global network.

The ASX retail stock also continued investing in technology, its supply chain, and global retail operations. Importantly, Lovisa said these investments were fully funded by existing cash flows.

What did Lovisa management say?

Lovisa Global Chief Executive Officer John Cheston said:

Lovisa has once again been able to deliver strong global sales and profit growth, with the highlights being continued growth in the Americas and Europe and another exceptional Gross Margin performance.

What’s next for Lovisa shares?

The early signs from FY27 are encouraging. Lovisa reported total sales growth of 16.4% on a constant-currency basis during the first eight weeks, while comparable-store sales increased 3.0%.

The retailer plans to continue expanding its physical and digital presence, supported by its strong balance sheet and steady cash generation.

After a 22% decline over the past year, today’s 19% rally of the ASX retail stock suggests investors are reassessing Lovisa’s growth prospects.

Whether the recovery can continue, however, will depend on the company maintaining strong comparable-store growth while successfully scaling its rapidly expanding international footprint.

The post Why is this $3 billion ASX retail stock rocketing 19% today? appeared first on The Motley Fool Australia.

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