Earnings reports from a few fashion and beauty sector stragglers yesterday: Adore
(ASX:ABY), Michael Hill
(ASX:MHJ) and Lovisa
(ASX:LOV), with the latter delivering one of the best results from the retail space.
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Fashion jewellery group Lovisa Holdings
(ASX:LOV) clearly showed it had shaken off the impact of Covid and lockdowns in its various markets around the globe as well as rising costs and inflation, boosting revenue 59% to $459 million for the year to June 30.
Lovisa told the ASX that comparable store sales jumped by just on 20% for the June year after discounting the impact of a net new store opening of 85 outlets to take the global number to 629.
Directors said that new stores have been opened in two new markets – Hong Kong and Namibia – since the new financial year started, while sales continue to grow strongly.
Gross profit jumped 64% to $362 million and earnings before interest and tax (EBIT; the usual retail measure of profit performance) jumped almost 7% to $79.7 million for the 53 weeks. On an adjusted 52-week basis, Lovisa said EBIT was up 81.4% to $77.5 million.
A final 30% franked dividend of 37 cents per share will be paid, more than double the 18 cents per share paid a year earlier. That took the total for the year to 74 cents per share, almost double the 38 cents per share paid for 2020-21.
In commentary, Lovisa told the ASX that “Comparable store sales momentum was pleasingly able to be maintained across the financial year despite disruptions experienced in Q1 in Australia, New Zealand and Malaysia where those markets were subject to temporary closures, with overall trading days lost higher than in prior year in that period.
“Once stores were able to be open and trading and restrictions were lifted we were able to deliver strong growth across all markets as economic conditions improved, and maintain this across the financial year.”
Directors said the company boosted prices in the third quarter in response to rising inflation, “which helped to deliver strong sales growth with minimal impact experienced in volumes.”
“Whilst all markets grew strongly for the financial year, Asia continues to be our most challenging region with lower levels of tourism continuing to restrain performance.
On the record dividend, directors made it clear there was no pre-determined plan.
“The board will continue to assess dividend levels each half year and determine the appropriate level of dividend based on profitability, cash flows, and future growth capex requirements. The Board do not currently have a specific dividend payout ratio and will continue to base dividends on the cash flow needs of the company and the structure of the balance sheet.”
Looking to the current financial year, Lovisa said trading for the first 7 weeks of FY23 has seen a continuation of the strong performance of FY22, with comparable store sales for this period of +21.0% on FY22.”
“Total sales for this period are 66.1% up on the same period in FY22, with prior year impacted by lockdowns in parts of Australia, New Zealand and Malaysia.
“Since the end of the financial year we have opened another two new markets, with two stores now open in Hong Kong, and our first store open in Namibia. The store network is currently at 651 stores, with 22 new stores open year to date.
“We continue to focus on opportunities for expanding both our physical and digital store network, with structures in place to drive this growth in existing and new markets and expect rollout momentum to increase going forward. Our balance sheet remains strong with available cash and debt facilities supporting continued investment in growth.”
Lovisa shares ended at $22.52 yesterday, up around 10% since the start of the week.
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Meanwhile the more mainstream global jewellery chain Michael Hill
(ASX:MHJ) also did well in what was a challenging year.
The company reported a small lift in profit to $46.7 million and a small lift in final dividend which in turn boosted its full year payout.
On top of that Michael Hill directors revealed a small buyback of up to 5% of its shares, worth around $19 to $20 million.
The company, which had gone through an extensive restructuring – including the closure of some underperforming stores – said the solid gains of the year to June had continued into the early weeks of 2022-23.
Michael Hill reported a 13.4% for the first weeks of 2023. Sales were up 18.5 per cent overall, but the same period last year was impacted by retail lockdowns in NSW, Victoria and Auckland, NZ.
The final of 4 cents a share is up from 3.5 cents a year ago and with the interim of 3.5 cents, took the full year payment to 7.5 cents a share, from 4.5 cents in 2020-21.
CEO Daniel Bracken pointed to the way the company’s gross margin had remained strong during the year and how the company was able to achieve the sales and earnings lift with nine fewer stores over 2021-22.
“These results demonstrate that we have successfully shifted the emphasis from transformation to growth, as we continue to elevate and modernise the Michael Hill brand,” he said.
The company also noted that profit grew faster than sales over the past year, in a sign that its turnaround strategy was producing results
Michael Hill shares ended at $1.15 yesterday, up around 6% so far this week.
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But for online cosmetics retailer Adore Beauty
(ASX:ABY), the June 30 annual results added confirmation that the gloss for internet-based companies has dulled in 2021-22.
Adore revealed that trading in the first seven weeks of the new financial year was down 28% this time last year – the lockdowns a year ago bolstered sales at the time but the easing in Covid lockdowns and social distancing rules has seen shoppers return to tradition bricks and mortar retailing, as the results from Lovisa and Michael Hill confirm.
While Adore reported an 11% rise in revenues for 2022 to $200 million, it warned conditions were challenging.
EBITDA fell 30% to 5.3 million but statutory profit jumped 181% to $2.4 million.
The use of that word in a company’s results commentary is always a bit of a red flag to investors.
“Adore Beauty is also facing inflationary pressures around employee, freight and marketing costs, and consumer sentiment is more subdued,” the company told investors.
But the company ended the period with $29.8 million of cash and no debt, which like Fleetwood and Southern Cross Electrical the day before, is an enviable position to be in as interest rates rise.
Adore shares closed at $1.50 yesterday, down more than 15% this week in the wake of the weak figures.
