Brett Blundy’s fast fashion jewellery pedlar Lovisa marked down as profits battle to match store growth

Brett Blundy’s fashion jewellery pedlar Lovisa Holdings is battling to put the bling on its ambitious global expansion as financial returns fall short of store growth.

Shares in the Melbourne-based fast fashion player came under pressure on Monday after it unveiled a 6.5 per cent rise in half-year profit to $56.9 million and revenue growth of 8.8 per cent to $405.9m.

This result for the six months to December 31 came after store numbers jumped from 854 to 943, a growth of 10.4 per cent over 12 months, as it more than doubled its presence in Canada and built on its north-western European network.

A trading update indicates its shop performance is battling to keep up with inflation, with comparable stores sales up 3.7 per cent in the first seven weeks of the new calendar year and total sales up 12.9 per cent from the opening weeks of 2024.

Lovisa shares were down more than 6 per cent by late morning.

This is despite chief executive Victor Herrero saying the company had “once again been able to deliver solid sales and profit growth” and highlighting “outstanding” gross margins.

Mr Herrero credited the strong margin growth to a “focus on pricing and promotion management”.

“We will continue to focus on store profitability and action stores not delivering to required levels of return on investment,” he said.

Lovisa’s gross profit margin in the December half was 82.4 per cent — compared with 80.7 per cent a year earlier.

This margin helped lifted gross profit by 11.1 per cent to $334.67m, seemingly making the most of revenue growth.

But Lovisa’s costs were higher as it increased its spend on digital marketing and events and battled with inflationary pressures.

Operating expenses were up 11.3 per cent to $244.4m, with employee costs surging 11.8 per cent to $115.1m.

Property expenses jumped 22 per cent to $24.7m as it increased its store numbers in higher cost areas.

Lovisa grew its Australian store numbers from 175 to 180 in 2024, lifted its French shop count from 80 to 88, and added six stores in both Germany and the UK to a total of 53 and 57, respectively.

Lovisa added just two stores in the US, taking its total number to 209, while it grew Canadian stores numbers from 10 to 23.

Mr Herrero said Lovisa continued to focus on expanding its store and digital sales network, “with structures in place to drive this growth in existing and new markets and expect store rollout momentum to continue”.

It had opened 16 new stores since December 31, while closing two stores and relocating one store. This took the total store count to 956.