Lovisa Holdings Ltd (ASX: LOV) has just announced a European acquisition. Is it a really big addition to the Lovisa business?
What’s the acquisition?
Lovisa announced the acquisition of the European retail store network of the German wholesaler called Beeline. This is expected to add over 80 stores to the Lovisa global store network across six European countries.
Beeline currently operates 114 retail stores in seven countries selling fashion jewellery and accessories under the SIX and I AM brands.
Lovisa is going to acquire the shares of the six retail trading entities of the Beeline Group in Germany, Switzerland, the Netherlands, Belgium, Austria and Luxembourg. All of these stores are going to be rebranded as Lovisa stores.
However, due to COVID-19, Lovisa couldn’t provide earnings guidance for FY21 from this acquisition.
The acquisition details
The shares of these Beeline entities is going to be bought for a total cost of €60. That’s not a typo, Lovisa re-iterated that it’s costing “sixty Euros”. Beeline will ensure a cash level of the entities of €9.87 million in total and no financial debt will be taken on as a result of this transaction.
Lovisa also said that it has entered into a put option agreement for the acquisition of Beeline France, including a store network of 30 stores. There is going to be a mandatory consultation with Beeline’s French employee works council.
The acquisition of each country is expected to complete progressively from 1 March 2021 through to May 2021. The combined cash requirement for the fitout and inventory for the conversion of stores to Lovisa is expected to be less than €5 million.
E-commerce plan
Lovisa said that to complement the expansion of its European store network, it’s going on improving its e-commerce abilities in Europe to provide better support and have better logistics.
Lovisa FY21 trading update
Lovisa reminded investors that its 24 stores in France and 39 of its UK stores are temporarily closed because of government lockdowns.
In the rest of its store network it has seen a continuation of the improved sales trend, with comparable store sales for the first 19 weeks of FY21 of a 9.2% decline. Australia and New Zealand are the best performing regions.
Summary thoughts
Fellow Rask Media writer Patrick Melville recently looked at Lovisa and decided that it wasn’t the best ASX retail share to look at. Once the northern hemisphere gets over COVID-19 – perhaps with a vaccine – then I think Lovisa could be a strong performer. This acquisition could be a really smart long-term idea. But I do like the look of other ASX growth shares like City Chic Collective Ltd (ASX: CCX).