Analysts at investment bank Citi are viewing the tariffs announced by United States President Donald Trump as another headwind facing Lovisa.
In a note to investors, Citi analysts claims its sales could be impacted in the US – where 22 per cent of Lovisa’s stores were located by the end of the first half of FY25 – “as consumer propensity to spend may decrease on potential tariff-driven inflation, particularly for discretionary products such as costume jewellery.”
Lovisa manages just over 200 stores in the US, at 209 by the end of the first half. It is just behind Australia and New Zealand which had a combined total store count of 212 by half-year end – with Australia at 180 and NZ at 32.
Citi analysts also claim that Lovisa’s gross margins may be at risk given it sources most of its products from China and – “to a lesser extent” – India and Thailand, where 34 per cent, 26 per cent, and 36 per cent reciprocal tariffs were announced, respectively.
According to Lovisa’s latest modern slavery statement for FY24, 78 per cent of its supplier base, as a percentage of value contribution, came from China.
Thailand accounted for 14 per cent, and India at two per cent. Another six per cent comes from the USA itself.
“As of 2024, our supplier network comprises 91 factories spanning 4 production countries,” Lovisa shared in its modern slavery statement.
“Among these, 76 factories account for nearly 80% of the total value of goods supplied to our stores, highlighting the significant role they play in supporting our operations and ensuring the consistent supply of high-quality product to our customers.”
This comes at a time when Lovisa “has already consistently taken price (which may make it harder for it to take prices further to offset tariff costs)," Citi analysts added.
Meanwhile, analysts at investment bank Jarden expects Lovisa to mitigate the majority of tariff-related gross profit margin pressure through a combination of US – and global – price increases and supplier renegotiations. Jarden noted that a 9 per cent US price increase could offset estimated lost FY26 gross profit dollars.
"We, however, expect volumes to underperform relative to consensus expectations due to the impact of price increases, declining consumer sentiment, and decreasing global growth."
As a result, Jarden analysts have downgraded its rating to neutral, highlighting earnings per share downside risk offset by potential upside risk if Lovisa's store rollout accelerates or if it negotiates stores at more favourable terms "given the strength of its balance sheet and rental track record."
By revenue, Lovisa's Americas market – which also includes Canada and Mexico – was at $102.1 million, up from $91.4 million in the first half of FY24.
It is the third largest geography by revenue for Lovisa, behind Australia and New Zealand at $115.1 million, and Europe at $137.0 million.
Despite the tariff troubles, Citi analysts have set a target price for Lovisa of $25.86, which is $3 above its current share price of $22.85.
Jarden analysts are projecting a more neutral price target of $22.87.
The other challenges that Lovisa is currently facing include a class action lawsuit from 300 former employees as well as new emerging competitors, including Harli + Harpa – a newly launched jewellery brand by former Lovisa CEO Shane Fallscheer.