LOV FH25--A mixed bag (again)--Top10 holding

 LOV FH25 –a mixed bag (again)

Sales up 9% (expecting 10% for FY)

PBT up 11% (expect 11% for full year)

NPAT + 7% due to tax rate changes and tax loss accounting

GOOD

Europe and Canada store rollouts were good.

GM 82.4% (see below) at a record, LOV explained due to better supplier terms, being careful on promotions, and better pricing. Good result.

Inventory looks better after drifting over the last couple of years.

Comps 0.1% in 2H but +3.7% in first 7 weeks of 2H.

DISAPPOINTING

Store rollout was slower than expected, with 47 net versus 60 expected. LOV admitted slower than expected but cadence has lifted in q2. CEO (retiring) predicted more stores will be added in 2025 than 2024, implying over 1000 by year-end, est 1020. So overall, it's a bit slower. The US was a standout disappointment, and LOV forecast that the US should start to pick up in 2H (+2 in fh—low). Store roll-out cadence appears to be picking up, we shall see. Ohio DC (US) opened in August so part period and should gain momentum from now.

Asia is challenging and IMO LOV is a Europe and an Americas story, I have no big hopes for Asia, especially China, maybe a few of the peripheral markets can do well. LOV commentary is supportive of growth. LOV continue to analyse China (it's tricky IMO).

OTHER

Spoke to the competition, and said they see a new competitor somewhere in the world every week, LOV believes (as I do) they have a competitive advantage in superior supply chain (scale) and product innovation speed to market.

Lack of scale in various markets is in the results (drag). The CODB is changing as more expensive markets increase in the mix. Usually takes a few years for a store to mature.

Tariffs, not changing suppliers and believe most likely is cost will be passed through in the US by the industry. Ed. Maybe some volatility. They note that their Chinese suppliers are moving factories into SE Asia. I note that given LOV’s tight supply chain (its advantage) that they run changing suppliers is not an easy decision. 

OVERALL

I think the positives outweigh the negatives, seeing some store rollout momentum from here is important. Having said that I will have to roll back my store rollout assumption which is 120pa then slow in a few years to 100. Not expecting a big change due to this. Underlying profitability measures are still impressive for LOV.  

I was quite nervous going into this result given the CEO change could have seen an air pocket, maybe we have seen that but not too bad.


 

 


 


 


 

 

 

 

Comments

Post a Comment

Popular posts from this blog

Performance Review FY2024--

  REVIEW OF PERFORMANCE fy2024 The numbers are in for 2024. The portfolio generated 20.8% (after costs and some cash taxes [1] ), the benchmark return was 13.4%. I am satisfied with the result, considering all things. What are all things? Was I in the fortunate receipt of much good luck (or bad luck), or did I utilise much higher risk in a rising market? Did style assist me? Does the result differ from what could be considered a random outcome (that is the hardest to assess)? I will attempt to address some of these in the following text. The following post will be divided into several sections addressing various segments. To reiterate my investment philosophy is to buy quality companies when they are reasonably priced. Of course, this sets a conscious boundary on likely results, up and down. I am consciously setting a limit on risk by skewing the portfolio almost totally to quality growth companies with a long history of profitable businesses. The belief is that over the long...
Read more

INVESTMENT CHECKLIST

  CHECKLIST FOR INVESTMENTS Overall I want this to be short enough so that I will use it and long enough to be useful. not War and Peace. In deference to Charlie Munger who continually suggested using a checklist, well I am getting on! Can be built up and on over time. Understandable business Do you understand the positioning of the business versus its competitors, customers and suppliers? What are the critical products, services and relationships? Is the size of the market(s) able to be estimated? Are there existential risks to the business, structural decline, or obsolescence? Operating History EPS growth, consistency/volatility is it forecastable? ROE/GM stability and level. Ability to manage margins. Total asset growth can the business profitably deploy assets. What has the reinvestment rate been? NPM level and stability. Does the business generate FCF, does CF reconcile to earnings? Given the above has the company favourable LT prospects? Management Condu...
Read more

Post Results--Examining the tail--PXA MIN CKF DMP SHL IEL DDR

  EXAMINING THE TAIL—PXA DMP RMD IEL DDR SHL MIN Almost all of my top 10 holdings are clear of significant issues with maybe valuation being the main point of conjecture. These investments represent a large proportion of the funds deployed. There is also a tail these are small or middling positions as launching pads to potential further investment but with current issues that may preclude investors from becoming overly excited about them. Therefore, they have potential attractive upsides. The underlying business should be sound and the issues short term. These holdings can be upscaled if the issues are indeed ST, however, not all will turn out favourably. How are these going? This is not an in-depth analysis but an overview of the short-term issues, are these issues becoming better or worse? Pexa (PXA) My thesis here rests with the Australian business being a natural monopoly, that appears intact. Secondly, Australian success can be repeated in the UK. Success in the UK rem...
Read more