Supply chain problems, including freight bottlenecks and warehouse closures in China, as well as slower economic activity and temporary store closures due to lockdowns, combined to reduce total sales by 32.2 per cent during the six months to 30 June 2020.
Despite the trading disruptions, revenue remained relatively stable for the year, declining 3.2 percent to $242.2 million.
As a result of lockdown closures, Lovisa’s e-commerce sales increased by 311 per cent for the financial year.
The report noted, “Focus on our digital capabilities was accelerated leading into lockdown and we now service all eight of our major markets via digital store fronts across the globe… We have also recently appointed a Head of Digital and Marketing to maximize the results in this area.”
Shane Fallscheer, managing director Lovisa, said, “We are pleased with what our team has been able to achieve through the disruptions to our business over the past six months, and whilst it has had a temporary impact to sales and profitability we remain confident in our growth objectives and have been able to maintain the balance sheet strength required to deliver on them. This leaves us very well placed for the future.”
The company incurred costs related to its continued international expansion, adding 45 stores to its network – 66 new locations offset by 21 permanent closures, including two in Australia – bringing its total, including 41 franchised stores, to 435.
Notably, Lovisa management took the decision to permanently close all nine of its Spanish stores “due to poor support from landlords through the lockdown period”, incurring an impairment charge of €2.1 million ($3.4 million).
The company has appointed a “senior leasing executive based in the Northern Hemisphere” to oversee future international store openings.
Over the course of the year, Lovisa pursued its most aggressive expansion strategy in the US market, opening 29 new stores for a total of 48. The country is now Lovisa’s third-largest market after Australia (152 stores) and South Africa (62 stores), overtaking the UK (42 stores).
At the time of publication, 59 Lovisa locations were temporarily closed due to COVID-19 restrictions, of which 30 were in Melbourne.
More reading:
Lovisa closes Australia, New Zealand stores
Lovisa defies retail downturn; plans new stores
2020 State of the Industry Report