Low-price jeweller Lovisa has seen a $3 lift in its share price this week after at least one broker told investors that the stock is now worth buying.
In a note to investors on Tuesday this week, UBS announced that it has upgraded its stance on Lovisa’s stock (ASX:LOV) to ‘Buy’, mostly due to the stock price slipping since mid-February from a high of $33 to a low of just over $20 per share – what some might consider a bargain. The share price has since nudged back up again this week to just over $24, and now settling at $23.22 as of writing (April 9, 11:00am).
According to UBS, the upgrade to buy was because both the share price and its valuation dropped significantly, meaning many of the risks investors were worried about are already reflected in the price.
Risks exist from the pace of its FY26 estimates of new store growth, which UBS noted is slower, but agreed that this has historically been lumpy. They also pointed out that Lovisa’s like-for-like sales growth in AU/NZ has been falling, and highlighted the losses recorded by chairman Brett Blundy’s Jewells brand venture in the United Kingdom.
Analysts at Jarden told investors on February 20 – following Lovisa’s H1 FY26 announcement – that they are not concerned about the magnitude of Jewells’ losses, which contributed a $10.8 million EBIT loss. They said they’d be more worried if management were not finding new growth avenues.
But UBS’ latest note said these risks are arguably more priced in given the share price and P/E multiple decline, “while the extent the LOV customer (youth skewed, low price point, leveraged to socialisation) is more resilient in the current environment is somewhat underappreciated, and we think LOV management is unlikely to tolerate Jewells losses for the long term.”
All this said, they believe the risk/reward is more attractive.
Going deeper into the detail, UBS shared that Lovisa enjoys significant store growth potential, assisted by a consistent format across markets while leveraging a low ticket price and socialisation by a predominantly youth (16-35) consumer base, which the analysts add are resilient compared to other retailers.
“Store growth continues, albeit remains lumpy in 2H26E to date, and is skewed to more established regions. LFL sales growth remains modest, with rising ANZ competition from Harli + Harpa (founded by former LOV CEO Shane Fallscheer) a headwind and UBSe below VA, yet overall revenue growth remains attractive.”
As for Jewells, UBS told investors that the broker’s estimated EBIT losses here should reduce but may remain significant given execution issues to start and the challenged UK consumer.
This comes as Lovisa invested in a new store for Jewells, bringing the store count back to seven. Last year, Ragtrader reported that Jewells had seemingly shut one of its stores. The new store was opened in February at Brent Cross, with UBS noting that the pricing there appears lower with a lot more ranging.
“We think LOV has a disciplined management team that is unlikely to tolerate multi-year losses. Hence, in our view, Jewells either becomes a successful new format or LOV seeks to significantly reduce losses, with closure a possibility.”
As for the recent slip in share price since Lovisa shared its half year results, this appears to have also been driven by the fashion jeweller’s first half net profit result, which Jarden analysts claimed was 14 per cent below consensus.
Lovisa’s NPAT hit $58.4 million in the first half, which is down slightly from its $56.9 million NPAT in the same period in FY25. However, Jarden told investors the day after these results were released that the comparison is “messy” as consensus didn’t report ex-Jewells NPAT.
Minus the losses, Lovisa’s total EBIT should have been $109.1 million, and its total NPAT should have been $69.6 million.