A shake-up in Lovisa’s share price (ASX:LOV) over the last year amid growing competition and a troubled UK push has led one broker to downgrade its rating on Lovisa stock.
In a note to investors, UBS pointed out that Lovisa’s share price performance has been mixed through 2026, which is down 11 per cent since January 1. In recent weeks, the low-price jeweller’s stock rose from $20.66 on July 24 to a peak of $27.10 on August 7, before shifting back down slightly to $25.01 at close of trading on August 12.
According to UBS, this recent share price performance, as well as a re-rating on Lovisa’s price-to-earnings multiple, have led them to shift its rating on Lovisa stock from buy to neutral. This is despite what the broker calls an “attractive growth outlook”.
This includes optionality with Lovisa’s Jewells venture in the United Kingdom, which is weighing on Lovisa earnings. In the first half of FY26, the company’s reported EBIT was up 8.9 per cent to $98.3 million, reflecting a 20.4 per cent growth from Lovisa’s store portfolio, but offset by start-up costs of Jewells, amounting to $10.8 million.
Other Australian retailers have been pulling back on the United Kingdom this year, including most recently Peter Alexander, the sleepwear brand owned by Solomon Lew’s Premier Investments.
There are currently seven Jewells stores in the UK according to its website, which is relatively unchanged over the last year, apart from what appeared to be a store closure and re-opening earlier this year.
UBS told investors that multi-year losses are unlikely to be tolerated by Lovisa chairman Brett Blundy and his team. Moreover, they also expect fitout upgrade investments across Lovisa’s store portfolio to moderate the competitive threat of emerging low-price jeweller Harli + Harpa, particularly in Australia.
That said, UBS does see Harli + Harpa’s ongoing expansion to be a threat. The low-price jeweller was founded by former Lovisa CEO and co-founder Shane Fallscheer, with the brand now at over 70 stores globally since being founded two years ago. The vast majority of these stores are located in Australia, with a few stores also scattered across New Zealand, Southeast Asia, Africa and now the United Kingdom.
Media reports also indicate that Fallscheer has won a trademark battle in the United States – Lovisa’s largest retail market by store count. Blundy had taken on the Harli + Harpa trademark in the US, which has since been handed over to Fallscheer under court ruling.
In the US, Lovisa operates over 237 stores, compared to 186 in Australia. Altogether, Lovisa held 1,095 stores by the end of the first half of FY26.
Despite these threats, UBS told investors that Lovisa enjoys significant store growth potential assisted by a consistent format across markets while leveraging low ticket price and socialisation by a predominantly youth consumer base, which is typically a more resilient consumer cohort.
“Store growth, the key EBIT growth driver, was strong in FY26E with this expected to continue in FY27E,” the UBS note read. “Like-for-like sales growth has been weak since the strong first eight weeks 1H26 (+5.6%) with competition from Harli + Harpa a headwind that has weighed on ANZ sales/store.”
UBS expects this can be managed, in AU/NZ and other markets, now that Lovisa ranges have been updated and the new store fitout is being rolled out. “Although, it remains a risk.”
As for Jewells, UBS estimates that its EBIT losses should reduce but remain significant, given execution issues to start and the challenged UK consumer.
“LOV has a disciplined management team that we believe is unlikely to tolerate multi year losses,” the UBS note read. “Hence, in our view, Jewells either becomes a successful new format with rollout potential or LOV seeks to significantly reduce losses, with closure a possibility.”