Affordable on-trend jewellery retailer Lovisa Holdings Ltd (ASX: LOV) will temporarily close its U.K stores, as England and Scotland enter a new COVID-19 lockdown. At the time of writing, the Lovisa share price is $11.15, down 4% on Tuesday.
Shareholders have endured a very volatile ride with the Lovisa share price crashing 71% during the COVID-19 market selloff between October and March last year. The Lovisa share price has now mostly regained these losses, down about 7% over the last 12 months.
What does Lovisa do?
Lovisa is a fashion jewellery company operating mainly in Australia, where it has 152 stores; and South Africa, with 62 stores. Lovisa’s corporate website advised the company was created “out of a need for on-trend fashion jewellery at ready-to-wear prices”.
Lovisa was founded by its Managing Director Shane Fallscheer, and BB Retail Capital, an investment company established by billionaire retail entrepreneur Brett Blundy.
In early December, Lovisa acquired the European retail store network of German wholesaler Beeline GmbH, for the grand price of 60 Euros. Yes, only 60 Euros or close to $96 AUD!
The Beeline acquisition includes 84 store locations. 54 are in Germany with the remainder spread across Switzerland, the Netherlands, Belgium, Austria, Luxembourg, and France. Not bad for $96 AUD!
What was announced Tuesday?
On Tuesday, Lovisa advised the market that “As a result of the announcement by the UK government of a further lockdown in response to increasing COVID-19 cases, our 42 UK stores will be subject to temporary closure effective immediately, with the timing for reopening subject to further government advice.”
The only positive in the announcement was that Lovisa’s other retail stores and online business will continue to trade.
Is this a buying opportunity?
In my view, the current share price does not represent a buying opportunity. Lovisa has branded itself as an on-trend retailer, meaning it must keep up with current trends to remain relevant.
Lovisa’s corporate website claims that 150 new styles are delivered to stores each week. I feel this poses a significant and perhaps under-appreciated risk that Lovisa may have difficulty selling merchandise that becomes ‘unfashionable’.
One company which does not face this risk is Redbubble Ltd (ASX: RBL). In Redbubble’s 2020 annual report, CEO Martin Hoskin said, “The Group was particularly well suited, versus traditional retailers, by the nature of our offering: more differentiated and personalised products, almost immediate timely product designs created by the artists and negligible stocking or inventory risk as a result of the print-on-demand offering”.
The Redbubble share price was up circa 8% on Tuesday. I recently outlined Redbubble as a share to consider buying which you can read here.
