Analysts at investment bank Citi are sticking to their sell-rating over Lovisa stock.
In a note to investors, the analysts have identified several risks to the brand’s long-term rollout expectations, claiming potential operational issues in newer growth markets based on extensive store visits by the Citi team.
This comes as Lovisa hits 1,000 stores globally this week, seemingly ahead of Citi expectations.
The analysts also singled out Brett Blundy’s latest retail creation called Jewells – a new jewellery chain targeting the premium space in the United Kingdom – with analysts claiming this may suggest the core Lovisa format “is more mature than previously thought.”
“We see potential for a positive trading update in the near term [for Lovisa] which could feature an acceleration in the rollout, strong LFL sales (potentially driven by discounting with gross margins only revealed at the FY25 in August 25) and/or discussion around the longer-term potential of the new Jewells format,” the analysts wrote.
Blundy’s Jewells business was launched a few weeks ago in the United Kingdom through various social media campaigns, with stores already earmarked for opening across the country. This comes as Blundy also launched a new lingerie brand called Léays in Australia.
Campaigns include a documentary released on YouTube, featuring Blundy himself talking up the new brand.
“Jewells is an adaptation and outflow of Lovisa,” Blundy, who is also currently the chairman of Lovisa, said in the documentary.
“Lovisa has been marvellously successful and customers around the world love Lovisa. The ability to bring much more elevated and much more elegant products is now what they need.”
“Our number one job is to figure out what a customer is going to want, sometimes what they don’t even know that they want, and then we’ll deliver it in a package that’s appealing.”
Jewells has already stacked up a c-suite, led by CEO Peter Bohn, who was the general manager of business development at Lovisa in 2016-2017, and also became co-founder and CEO of a gardening business and a grocery home delivery business, as well as founding a consultancy firm.
Other c-suite leads include chief brand officer Leah Uka, founder of Narvvi skincare in the UK, and chief product officer Kate Bryant, the former product lead at UK jeweller Abbott Lyon and former buyer at DCK Group.
Alongside the launch of Jewells, Citi analysts also claimed that emerging competition also remains a key risk to monitor for Lovisa, including Harli + Harpa which has around 27 stores.
“Further, we see a level of strategic uncertainty following this year’s upcoming management change, with the new CEO [John Cheston] commencing in early June 2025, that may not be factored into the stock’s PE multiple.”
Speaking on the global store rollout hitting 1,000 stores, Citi analysts said this is consistent with its recent report which flagged a recent acceleration in the rollout and is likely to be received positively by the market.
“However we have previously questioned the quality of some new stores based on our proprietary research,” they added. “We note Victor Herrero will be leaving the company this week and continues to hold ~3 per cent of shares outstanding in the company.”