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Lovisa (LOV) - Initiation of coverage

Is the growth in bling priced in?

11 April 2024

We have written a detailed report on Lovisa, a global, affordable, fast fashion jewellery retailer with a strong growth opportunity. We forecast the store network to grow at a compound annual growth rate of 15% over the next four years with stores in existing and new markets. EBIT is forecast to grow at 23% annually over four years in our base case. 

Australian retail sales June 2023

Volumes down

08 August 2023

Australian retail sales increased 3.0% in June 2023. The notable swings for the month were a moderation in the sales decline for electronics but a sharper slowdown for fashion and department stores. The downturn is spreading to more categories and will continue through to late this calendar year. The data also reveals that retail volumes per capita declined by 3.4% in the June 2023 quarter. Elevated price inflation is propping up spending and will fade later this calendar year in non-food and by mid-2024 in food.

While retail sales have started 2023 at a healthy run-rate, a downturn is looming. In this report, we detail our forecast for retail sales and emphasise that the June 2023 quarter is likely to be much weaker in non-food with food retailing propped up by inflation. The downturn is just commencing and likely to last until the end of 2024. We forecast retail sales growth of 2% in 2023, compared with 11% achieved in 2022 and long-term trends of 5%.

The insights from Amazon’s 2022 results

Perhaps Amazon is the issue

01 March 2023

Amazon Australia’s 2022 financial results reveal the retailer has delivered very strong sales growth with improving profitability. This is in stark contrast to the declining sales and loss-making results for some online pure plays. In our view, Amazon is investing for the long-term, which is evident in its distribution centre infrastructure, marketing investment and Amazon Prime membership, which may now be one in four Australian households. The debate in our mind is how much money and time will be spent by Wesfarmers and Woolworths trying to establish their own online ecosystem. We expect it to be costly for all involved.

Amazon Primed But Not Ready

How much floor space will Amazon need?

20 April 2022

Amazon has made some noteworthy decisions in Australia. It now has a massive 200,000 sqm distribution centre (DC) operating in Western Sydney and has held back on raising the price of Prime, unlike the US. Is this a sign of more aggressive customer acquisition in Australia? Why is Prime so much cheaper here than in the US? In our view, Amazon is simply in its infancy. It will need to expand its same day delivery service before lifting the price of Prime. In order to offer same day delivery, Amazon probably needs 3-4x the DC capacity that it has today.

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