Lovisa jewellery chain sparkles on ASX debut

Lovisa has had a promising start on the ASX

Fast fashion jewellery chain Lovisa hit the sharemarket yesterday with a sparkling debut on the Australian Securities Exchange, ringing in the new year with a 7.5% jump in its share price.

The jewellery chain, founded by Rich Lister Brett Blundy, offered shares at $2 when it floated yesterday morning, with the price leaping to $2.15 by close.  It was still trading at a similar level this morning.

The debut, which was originally rumoured in September, is one of the strongest floats of 2014, during a year that saw a long list of Aussie companies rush to join the IPO market.

Most have not fared nearly as well, with the much-hyped float of surf fashion retailer SurfStitch disappointing earlier this week, falling from an initial price of 98 cents to a low of 94 cents.

Lovisa raised $110 million through a sell-down of existing shares, giving the retailer a market capitalisation of $210 million.

Blundy’s BB Retail Capital retained a 41% stake in Lovisa and cofounder and chief executive officer Shane Fallscheer kept a 7.5% shareholding.

The company also managed to attract high profile investment from Domino’s Pizza director, and Pacific Brands investor, Paul Cave. Other noteworthy investors include Blundy’s sister Tracey and Lovisa chairman David Carter.

Blundy and Fallscheer opened the first Lovisa store in Chermside, Queensland, in 2010 and have since enjoyed the rapid growth of the brand, with revenue ballooning from $25.5 million in the 2011 financial year to $105.7 in the 2014 financial year.

The 220 company-owned stores across Australia, New Zealand, Singapore, Malaysia and South Africa, are expected to turn over $134.7 million in 2015, growing by 27.4%.

The brand is one of six retail outfits under the BB Retail Capital umbrella, which also includes Bras ‘N’ Things, Dusk and Adairs.

In May, Lovisa’s sister brand Diva unexplainably switched a number of stores to the Lovisa brand, leaving some commentators to believe there was too much overlap between the two brands in the portfolio.

Brian Walker, chief executive of the Retail Doctor Group, told SmartCompany it was little surprise to see Lovisa make a strong debut on the ASX, given it is such a highly profitable business.

“They are a very profitable business,” says Walker. “That replica jewellery category, for the last 10 years, has traded at eight or nine times profit.”

“The jewellery appeals to the tween market and upwards. It’s hugely profitable because it doesn’t cost much to make – it’s all made overseas,” he says.

Walker says Lovisa has a very strong market positioning that can easily change with fashion trends or influence trends quickly.

He estimates Lovisa stores turn over around $15,000 per square metre, with some stores he is aware of even reaching heights of $40,000 per square metre.

“It really is an extraordinarily high trading and high profit business,” says Walker.

SmartCompany contacted Lovisa but did not receive comment before publication.