Why is the Lovisa (ASX:LOV) share price tarnishing today?

The Lovisa Holdings Ltd (ASX: LOV) share price is down around 3% after the affordable jewellery business announced a trading update to the market.

It gave this update before its annual general meeting (AGM).

This announcement focused on the company’s store network and current trading conditions.

Lovisa’s sales recovery

Lovisa said that its global comparable store sales for the first 20 weeks of FY22, which continued its strong trajectory and were up 25.2% on FY21, with total sales for the period up 46.1% on FY21 despite the impacts of the lockdowns in Australia, Malaysia and New Zealand.

The comparable store sales are measured based on stores open and able to trade. Ones that are closed because of the government restrictions are not included.

The strength of the sales growth could be an important factor for the Lovisa share price.

Store count and status

Lovisa said that there are currently 570 stores in the global store network, with 31 new stores opened since the end of FY21 and five closures.

It has now been able to open all the stores in its network and have been able to re-open all stores in its network that had been temporarily closed in Victoria, New South Wales, Malaysia and New Zealand back to trading.

However, stores in Austria have now moved into lockdown and the three stores there have been closed.

Lovisa also noted that it has two new franchise stores in Cyprus, bringing its geographical coverage to 21 countries globally.

Outlook for Lovisa

Management’s outlook can have an impact on investor thoughts on the valuation and Lovisa share price.

Lovisa said that despite the disruptions that the business continues to face globally, management are pleased with the way the business has performed and remain focused on continuing to drive it store rollout.

However, the company did have a somewhat negative comment regarding its store rollout. Lovisa said:

Whilst we are pleased with the pipeline of opportunities we have available, our store rollout for the year to date has been slower than we would like as a result of logistics delays and shortages of store build contractors in key growth markets.

Whilst we are managing this closely, it may continue to cause rollout delays in the short term as well as increases in the cost of store builds. We also continue to face the same challenges in relation to freight costs that we have previously noted, with reduced global freight capacity still impacting on pricing.

Victor Herrero has now formally commenced the role of CEO and has previous experience in growing businesses into countries like China and India, which are large markets that Lovisa might be interested about growing in.

The post Why is the Lovisa (ASX:LOV) share price tarnishing today? 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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