UBS analysts have cut Lovisa some slack after checking out the new Jewells brand concept launched by Brett Blundy this year.
In a note to investors, analysts at the investment bank upgraded their rating from sell to neutral, and upped their 12-month price target of Lovisa (ASX:LOV) to $30, up from $26. The low-price jeweller's share price currently sits at $30.73 at the time of publishing.
This comes as store growth for Lovisa saw acceleration in recent weeks, especially in Europe, moderating concerns from the investors. Meanwhile, the new Jewells format, housed under Lovisa, provides scope for greater store and sales growth.
“Further, we are increasingly confident given the appointment of the well-regarded Mark McInnes to the executive deputy chairman role, complimenting John Cheston as global CEO,” the note read. “Hence, despite concerns regarding US tariffs (Lovisa sources 78% from China, USA 22% of 1H25 stores) and competition (Harli + Harpa) concerns moderating pace of LFL sales recovery, the risk reward looks more balanced, thus, we upgrade from sell to neutral.
“We revise FY25E/26E/27E by -2.8%/+2.8%/+5.5% due to higher store numbers (Lovisa and Jewells), moderated by start-up losses in Jewells.”
Going into detail, UBS analysts said the store growth in the Lovisa brand has been the key driver of revenue for the company and its share price. Based on recent tracking of the Lovisa website, the analysts project the rate of net store growth is accelerating, and importantly the upside is skewed to a core region like Europe (led by the UK).
This comes after Lovisa’s total store count globally passed one thousand altogether.
“The current size of the store network exceeds Visible Alpha (VA) and previous UBS estimates for FY25E, suggesting for the first time in some years, the store network will be a positive surprise,” the note added. “Further, we are more confident that the rate of store growth will remain more elevated than previously expected, incorporating this into UBSe.”
As for the new Jewells concept, UBS analysts recently visited two of the seven new stores – one in White City and the other in Reading – on the day they opened.
The analysts note the stores are located in leading shopping centres, with a more luxurious format and generally larger size than Lovisa. The product range is also higher priced, ranging from £30 to £3000 (~A$62 to A$6,200) compared to Lovisa which is around £1 to £50.
Jewells also has a more curated range – around 1,200 SKUs, compared to 5,000 to 6,000 SKUs at Lovisa – and a wider product offering, including tattoos, which UBS note were either permanent or made-to-fade using Ephemeral technology.
UBS estimates there will be around 12 stores by the end of FY26, with an estimated $3 million in start-up losses as the concept is developed.
“Overall, Jewells provides optionality for stores, sales and earnings growth for LOV, yet this upside is not part of revised UBSe.”