Lovisa books growth on international expansion
Accessories retailer Lovisa has delivered double-digit earnings and revenue growth for the first-half of FY18, with international expansion driving a 22.5 per cent increase in net profit to $24.8 million.
Delivering its half-year result on Wednesday morning, Lovisa said that earnings before interest and tax (EBIT) increased by 23.2 per cent to $34.7 million in the six-months ended 31 December.
Revenue increased by 18.9 per cent to $118.6 million, while comparable store sales growth of 7.4 per cent was achieved on a strong Christmas and positive trading across all its markets.
Lovisa continued its international roll-out in the first-half, opening 31 new stores after accelerating its UK roll-out with 12 openings.
The retailer opened six stores in Australia, eight stores in South Africa and one in Singapore, Malaysia, Spain, the US and Vietnam.
This expansion drove its cost of doing business (CODB) up by 120 basis points to 48.1 per cent, which was also impacted by the opening of a support office in Melbourne and a distribution centre.
Gross margin increased by 260 basis points to 80.4 per cent on what management said was strong range performance, a stronger Australian dollar and a disproportionately higher mix of sales over Christmas.
“It’s pleasing that the business has been able to maintain the solid start to the year as we continue our global rollout, helping to deliver both sales growth and gross margin expansion,” CEO Steve Doyle said.
“We continued to expand and optimise our network to drive growth and performance…we were also able to continue to invest in new market expansion with our first store opened in the US in November 2017 and the recent opening of our first store in France.
Lovisa did not provide any specific full-year guidance, saying that EBIT is generally skewed towards the first-half.
Management did say it did not expect gross margin benefits incurred in the first-half to continue at the same level as currency tailwinds moderate and strong ranges from the prior year are cycled.
Trading since new-years has been “in line with expectations”, Lovisa said.