Lovisa Holdings Ltd (ASX: LOV) delivered another year of strong global growth in FY 2025, setting the stage for further expansion as a key competitor struggles.
Backed by retail doyen and chairman Brett Blundy, who holds a 39% stake, the fast-fashion jeweller popular with teens operates over 1,000 stores across 50 countries.
The Lovisa share price finished 13.2% higher to close at $41.23 on the day of the results, more or less the same price at which the Lovisa share price sits today.
Lovisa FY 2025 Financial Results
Lovisa delivered strong top-line growth, underwritten by 161 new store openings primarily in the Americas and Europe.
Key financial results include:
- Revenue of $789.1 million, up 14.2% year-on-year
- Gross profit of $654.7 million, up 15.7% year-on-year
- Earnings before interest and tax (EBIT) of $138.7 million, up 8.2%
- Net profit after tax of $86.3 million, up 4.8% year-on-year
- Earnings per share of 78.1 cents, up 3.5% year-on-year
- Dividends of 77.0 cents per share, down 10 cents year-on-year
Lovisa’s controlled approach to promotions meant gross margin expanded another 100 basis points to 82.0%.
Cost of doing business, however, which includes marketing, store costs and overheads, increased 18.6%. That weighed on the strong revenue performance and resulted in soft earnings per share growth.
FY 2025 is the third year out of four that costs have increased at a faster rate than gross profit.
For most companies, this would raise concerns. Coupled with Lovisa management’s tendency to eschew questions on cost structure or future guidance, it does give me pause.
I am inclined to trust them given the track record of growth. At some point, however, investors need to see the hypothetical operating leverage available from growth take effect. Until then, Lovisa leaves itself open to disappointing the market, especially if growth comes in below expectations (even potentially due to exernal factors).
After accounting for lease payments and capital expenditure, Lovisa recorded a free cash flow of $82.5 million. That was used to fund dividends totalling $96.3 million, with the business relying on debt to fund the shortfall.
Interestingly, Lovisa wound back its total dividend by ten cents per share in FY 2025 likely retaining capital for future store openings and refurbishments.
Importantly, this means Lovisa’s net debt was $34.4 million in FY 2025, up from $23.5 million a year earlier.
Will Lovisa be Impacted by US Tariffs?
The majority of Lovisa’s products are sourced from China, making it vulnerable to US tariffs.
Management seemed unworried by the prospect, suggesting purchasing economies of scale should offset tariff impacts. My back-of-the-envelope (approximate) calculations indicate a 10% tariff would cut Lovisa’s gross margin by 48 basis points. That’s based on the US representing 24% of Lovisa’s total store network, and a gross margin of 82%.
While my concerns could prove overly paranoid, I do think tariffs may pose a risk.
Lovisa FY 2025 Geographical Performance
Lovisa delivered same-store sales growth of 1.7% in FY 2025, with all regions recording positive revenue gains.
From a sales-per-store perspective, the United States was the strongest performer, with high and growing revenue per store. Similarly, Europe is trending in the right direction, weighed down somewhat by new store openings in FY 2025.
Lovisa’s home market has been an underperformer, with Australian and New Zealand (ANZ) recording a second consecutive year of same-store sales declines. Lovisa said it plans to refurbish the ANZ network with “Series 5” formats to revive growth.
I suspect however the ANZ market growth has largely been exhausted. Capex spending will therefore sustain rather than improve earnings.
Asia, and Africa & the Middle East continue to trend sideways. Exact regional unit economies are difficult to ascertain, but both regions are likely to have a lower cost of doing business (rents, staff costs) so they can support fewer sales per store and still remain profitable.
A lot of hype has surrounded Lovisa’s entering the Chinese market. Management is more circumspect, preferring to “test and learn” from the two current stores.
Listening to the earnings call, China doesn’t appear to be a priority given the greener pastures in the Americas and Europe.
“…We still see a significant runway in the U.S.A. and Canada and in European countries. And I think it’s been John’s absolute focus since joining about focusing the organisation on where those biggest opportunities lie in the next 1, 2 and 3 years.” – Mark McInnes, Lovisa Executive Deputy Chairman, FY 2025 Earnings Call
Lovisa Competitive Landscape Evolves
Arguably, the most important news regarding the Lovisa share price wasn’t in the FY 2025 results at all.
Competitor Claire’s, a fast-fashion focused jewellery retailer, announced Chapter 11 bankruptcy for the second time since 2018. The company later announced it had sold its US and Canada operations, but European operations remain in limbo.
When asked, management could barely contain their excitement. Claire’s has over 2,700 stores, primarily in the US and Europe.
“In terms of Claire’s, I mean, that’s a wonderful opportunity for our shareholders. We know, as Mark said, where they trade the stores, the size of the store, where they’ve got two stores in a location. This is a wonderful opportunity and one that we’re taking very seriously.” – John Cheston, Lovisa CEO, FY 2025 Earnings Call
It’s also worth touching on the arrival of Harli + Harper, founded and operated by former Lovisa CEO Shane Fallscheer. The company has opened 20 stores in Australia this year, with plans for another 20 next year.
H+H presents a credible competitor to Lovisa. It’s hired tenured executives from companies including Cotton On and Accent Group. Google data shows it’s gaining web traffic on Lovisa, although that likely reflects Lovisa’s preference for brick and mortar stores.
That’s not a bad outcome for Lovisa. ANZ is a cash cow, used to fund overseas expansion. If Lovisa cedes some market share at home, but delivers another 500+ stores abroad, shareholders won’t blink.
More simply, the primary driver of the Lovisa share price is global expansion rather than domestic competition concerns, as long as the more saturated ANZ market holds up well.
Lovisa FY 2025 Management Changes
Lovisa has recruited two new senior executives from retail conglomerate Premier Investments (ASX: PMV), which owns brands including Breville, Myer, and Smiggle.
John Cheston, formerly CEO of Smiggle, has been appointed Lovisa’s new CEO.
His former superior, Mark McInnes, has joined the company as executive deputy chairman.
Together with stalwart CFO Chris Lauder and majority owner Blundy, Lovisa has an enviable quartet of retail experience at the helm.
Cheston’s long-term incentives are tied to achieving EBIT targets, with rewards only starting once an 18.5% threshold is reached. The LTI scales incrementally up to a maximum EBIT growth of 30%.
While these targets provide a clear indication of expected performance for shareholders, Cheston’s maximum annual incentive of $2.35 million is modest compared with the $24 million maximum LTI offered to former CEO Victor Herrero in FY 2024.
Lovisa FY 2026 Financial Guidance
Trading for the first eight weeks of FY 2026 saw comparable sales increase 5.6%. Total sales have increased 28.0% over the same period.
Cheston indicated the business would look to flex its operating leverage in the years ahead.
“What this business has done very well, it’s invested capital in systems, in people and infrastructure to make sure we’re set to continue the rollout of the stores. So I look at it as an opportunity to leverage the investment that’s been put into this business to accelerate in terms of store openings across the globe.” – John Cheston, Lovisa CEO, FY 2025 Earnings Call
Would I Purchase Lovisa Shares?
While the FY 2025 financial results were soft, Lovisa is well-positioned to deliver sustained profit growth in FY 2026 should operating leverage kick in. Additionally, management is itching to capitalise on a weakened Claire’s in the Americas and Europe.
I remain concerned regarding the capital expenditure and same-store sales, particularly in ANZ. More detail around regional performance could assuage this fear, because in the absence of detail I am inclined to take a more conservative or pessimistic view of things.
It’s worth remembering this because the Lovisa share price does go through periods of softness. While the stock is trading at an all-time high right now, a weaker trading update or broader retail slowdown could provide investors with a more attractive entry point — as has happened before.
Admittedly, I don’t think that’s likely in the near term with management about to turbocharge store openings. Total revenue growth of 28% in the first eight weeks of FY 2026 demonstrates the business is firing on all cylinders.
On a price-to-earnings multiple of 54, the market has already moved to price in strong growth expectations. In my view that premium is warranted, and if Lovisa delivers both strong revenue and operating leverage, the earnings multiple will fall considerably.
For that reason, I’m considering starting a position in Lovisa, despite the fact that the stock is not as cheap as I would like.
In the meantime, investors are paid a 1.8% (2.6% fully franked) dividend yield for holding on.
Quality growth companies are scarce on the ASX, and Lovisa continues to stand out as one that ticks all the right boxes. Even if it doesn’t join my portfolio at current prices (and maybe it will, in due course) Lovisa will undoubtedly remain on my watchlist.
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Disclosure: The author of this article, Lachlan Buur-Jensen, does not own shares in LOV and will not trade LOV shares for at least 2 days following the publication of this article. The editor of this article, Claude Walker, does not own shares in LOV and will not trade LOV shares for at least 48 hours following the publication of this article. This article is not intended to form the basis of an investment decision and is not a recommendation. Any statements that are advice under the law are general advice only. The author has not considered your investment objectives or personal situation. Any advice is authorised by Claude Walker (AR 1297632), Authorised Representative of Ethical Investment Advisers Pty Ltd (ABN 26108175819) (AFSL 276544).
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