Jewellery chain Lovisa has released its FY20 results, reporting that COVID-19 had a significant impact on its profits.
Lovisa reported that total sales for the second half of the year were down 32.2% (H120 total sales: +22.2%) with comparable stores sales closing out the year down 5.5%, after experiencing a 2.1% lift in the first half.
The business recorded a revenue drop of 3.2% to $242.2 million, which is a result of impacts initially in the Asian market, widespread store closures from March, as well as a disrupted supply chain.
Disruptions commenced with factory closures during the initial COVID-19 outbreak, followed by freight disruption and bottlenecks which still persist.
Despite this, MD Shane Fallscheer said that the business is proud of what it has achieved through this difficult time.
"We are pleased with what our team has been able to achieve through the disruptions to our business over the past six months, and whilst it has had a temporary impact to sales and profitability we remain confident in our growth objectives and have been able to maintain the balance sheet strength required to deliver on them.
"This leaves us very well placed for the future," he said.
Lovisa reported that gross profit was down 7% to $187.3 million, while gross margin was 79% on a constant currency basis.
The jeweller reported a 41.6% decline in EBIT to $30.6 million, while its EBITDA was down 28.3% to $44.7 million.
During the period, the business opened 66 new stores, totalling 435 at the year's end.
Digital performance
During the lockdown, Lovisa focused on its digital offering and was able to expand its capabilities to serve all of its eight major markets via digital stores.
Through the period, Lovisa launched four key initiatives that helped it realise strong digital sales.
These were the launch of fulfilment from store, live chat which drove direct sales generation, pre-sale capabilities and supply chain capacity delivered through multi-warehouse fulfilment.
These investments resulted in digital growth of 311% for FY20, with Q4 performing especially well, seeing a 382% increase.
The business also appointed a head of digital and marketing to continue to grow this area of sales.
Store growth
Despite the investments made into the digital business, Lovisa maintains that its driver of growth continues to be the expansion of stores internationally.
The business closed the year with 435 stores – a net increase of 45 stores from June 2019 – with 66 new stores opened for the year, offset by 21 closures including nine related to the exit of the Spanish market.
During the year, the business continued its roll out across France and the USA, now trading from 21 stores in France and 53 in America.
Lovisa reports that store metrics and range performance continue to be in line with expectations with good customer reaction and landlord engagement, however the business expects the roll out in France to slow due to the flow-on effect from COVID.
The business sees the USA and European markets as strong areas for growth and will continue to pursue opportunities there.
Board update
During the period, Lovisa's director John Armstrong stepped down and effective from August 26, John Charlton joined the Board as an independent non-executive Director.
Charlton is the previous founder and owner of Spendless Shoes and brings 38 years of retailing experience to the Board.
Outlook
Trading for Lovisa in the first eight weeks of FY21 are still challenging for the business, with comparable store sales for the period sitting at -19%.
The business has opened eight new stores since the end of the financial year and is ready to continue its store roll out.
The retailer has added a new senior leasing executive based in the Northern Hemisphere to help move these plans forward.
In a statement Lovisa said that despite the challenges, its balance sheet is in a good position.
"Our balance sheet remains strong, with a continued net cash position above $20 million and undrawn cash debt facilities supporting investment growth.
"We currently have 30 stores in metropolitan Melbourne, 19 stores in California, two stores in New York and eight stores in NZ closed temporarily due to continued government lockdowns.
"As a result of the current uncertainty in the global economic environment we are not in a position to provide any further information in relation to the outlook for the business."