Stock of the day: Lovisa

(AI video summary)

This video was created on 22 November for IG audiences by ausbiz.

ASX code: LOV

Lovisa's growth prospects amid market volatility

Lovisa, a prominent jewellery brand, recently released an annual general meeting (AGM) update showing mixed results. The company's global comparable sales for the first 20 weeks of fiscal year (FY) 2025 increased by just 1%, while total sales rose by 10%.

Although these figures fell short of market expectations, Lovisa is continuing its international expansion, having opened 27 new stores this financial year. This expansion underscores the brand's ambition, despite facing challenges such as rising competition, particularly in Australia.

Navigating slower growth and market expectations

Since the departure of former chief executive officer (CEO) Victor Herrera, Lovisa has shifted its focus to maintaining margins and pursuing profitable growth at a steady pace. This change aligns with the incentives of the incoming CEO, who aims to grow the company steadily rather than pursuing rapid expansion.

Despite the slower growth, Lovisa remains a market favourite due to its high-quality business model and strong management. However, the market now faces the challenge of determining the appropriate valuation for Lovisa, taking into account its growth prospects and competitive landscape.

Investment opportunities in cyclical stocks

Lovisa presents an intriguing opportunity for traders amid market volatility. The stock has shown resilience, recovering from recent lows. While short-term growth may be slower, long-term prospects are promising.

The brand's presence in 49 countries and its ability to adapt to changing market conditions make it a compelling choice for investors seeking exposure to cyclical stocks. Additionally, Lovisa's target market, which includes younger consumers less burdened by mortgages and student debt, provides a stable customer base.

As Lovisa continues to navigate economic uncertainties, investors might consider adding this stock to their portfolios, especially given its potential for growth in the coming years.