Jewells Costs the Same Again

FY26 full year result (year ended 28 June 2026), released 26 August 2026. Reporting currency: A$

Imagine being an executive team that just opened 160 new stores in a year. Just to be planning to do it all over again. I’m tired just thinking about it.

Sure, the Zaras of the world have even done a few times more than that. But this is a scale and pace that Australia doesn’t see a whole lot of.

Lovisa is a juggernaut of a brand. In the stores I have walked in Australia, England and the U.S., it is consistently one of the most productive in terms of traffic per square foot in a shopping centre.

Although the new Jewells concept is still loss making with fiscal 2H losses running similar to 1H. I’ve walked one of the new Jewells stores twice this year - get in touch if you’d like feedback (qualitative plus pictures).

The location had some customers but not one of the stronger stores in the centre. My sense from my two visits was that losses (based on that store) would have gotten directionally better over the financial year, and given losses for the whole concept stayed similar half-on-half this FY I suspect that sense was accurate given they’ve opened a new iteration in Brent Cross which presumably would have some start-up costs.

Rome wasn’t built in a day. And if you can hang on to your maturing earlier customers, especially when they have their own disposable income, it’s worth a shot within reason. Stay posted for more store-walk feedback from me this coming financial year to see if traffic picks up.

In other news, Lovisa Australia has seen a relevant slowdown and is an outlier in the group in terms of growth (or lack thereof). Management effectively didn’t talk to it at the result (an approach typically not ideal for investors), as management gravitates more to group-wide performance commentary.

In general Australian retail has shown some weakness of late. The perennial money spinner known as Australian housing has recently stopped spinning, and so the bank of mum-and-dad which seems to finance much of Lovisa’s business model presumably will take a hit.

I’m on the sidelines with this one at the moment. It feels part a macro call, and has a few cross currents to contend with. Jewells, which is a relevant profit drag at present, probably needs another period or two to shake out.

More work to be done here. Reverse broking welcome. Stay posted.

No financial guidance issued. No sales or earnings guidance provided, although recent group sales trading was provided - standing practice for LOV.

Trading update. The +3.0% comp to start FY27 is struck against +5.6% in the equivalent FY26 window: “…there's been improved momentum in the month of August.”

Outlook. “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 formats, with a long new store runway supporting continued store rollout momentum. Our balance sheet remains strong with available cash and debt facilities supporting continued investment in growth.”

FY27 new store openings — not formal guidance. Given verbally in Q&A: “we opened 160 over the financial year. I would be looking to a similar number to that in the FY '27.” The indication was not extended to closures: “I'm talking to store openings... we're looking at 160 new store openings for FY '27.” (FY26's 160 openings produced 105 net additions after 43 closures and 12 relocations).

Series 5 store fit-out. 53 stores opened to date, 28 already scheduled for 1H FY27. No uplift figure disclosed: “We don't give color in terms of the uplift we get from a Series 5 or whatever iteration.”

Jewells — no forward disclosure. No target store count, capital commitment or breakeven timeframe. A second concept is being trialled at the Brent Cross store, with no disclosed timetable: “once we're in a position to give some more color on Jewells, we'll do so.”

Gross margin and cost of doing business. No forward indication on either: “...we can manage our CODB tightly, we're all fully aware that the operating leverage of that will filter down to the bottom line.”

No underlying (ex Jewells) measure was provided at the full year result (as was done at the half).

Gross margin. +60bps to 82.6% on sourcing, ongoing promotional efficiency and improved shrinkage, and +270bps on FY23. US tariffs were paid in the first half and refunded in the second, netting to nothing for the year.

Depreciation, impairment and disposals. $11.6m of impairment and loss on disposal against $1.8m in FY25, from 43 closures and 12 relocations. EBIT growth lagged EBITDA.

Jewells. “We've not disclosed the second half.” The first half disclosed an EBIT loss of $10.8m and an NPAT loss of $11.2m, against $0.3m in each at 1H FY25.

Capex. $58.5m covering 148 new company-owned store builds as well as store refurbishments and investment into support technology, fully funded from existing cash flows.

Working capital. Inventory fell 12.8% to $70.7m against sales +17.6%, with year-end spot translation a large driver and an equivalent decrease in trade creditors.

Balance sheet. Debt facilities were extended for 3 years during the first half, with committed cash term debt facilities of $120m.

Dividends. Final 33.0 cents, 50% franked, to be paid in October 2026; full year 86.0 cents, a 100% distribution of full year earnings.

Long-term incentives. Group LTI expense fell to $0.8m from $1.7m. Nothing vested: the CEO's FY26 LTI Opportunity and all three FY2026 Executive LTI Award tranches lapsed, both plans needing 18.5% EBIT growth against the 14.1% delivered.

Only reported revenue and store numbers are provided by region (no comparable sales growth or profit is provided).

Europe. The largest region at 39% of group revenue, and the largest share of network growth — 34 of the 76 new (gross) stores in the United Kingdom, 20 in Germany. Europe includes Jewells, with no quantitative ex-Jewells line provided at the full year result (unlike the half).

Americas. 29% of group revenue. Canada went from 32 stores to 52 and the United States from 229 to 250.

Australia / New Zealand. Sales declined in both halves and the decline steepened from -5% at the half to -7% in the second. Australia alone was $170.3m against $180.2m.

Asia. The smallest region at 4% of group. Singapore went from 16 stores to 12 and Malaysia from 42 to 38.

Gross openings were flat at 160, but net additions fell 20% to 105 because closures doubled to 43. The churn cost $11.6m in impairment and disposals against $1.8m in FY25. The bar has not moved: “Our internal hurdles have not softened...better quality stores that we can do deals on with landlords in better centers.” Asked whether closures would run at a similar pace, management declined to say.

Reported sales growth halved between 1H/2H and constant currency comp sales mostly maintained. Total sales went from +23% to +12%, but comps were +2.2% at the half and +2.0% for the year, implying roughly +1.8% in the second. Comps exclude foreign currency by definition; the reported line does not, and Lovisa gives no constant-currency revenue for the result.

Australia and New Zealand went from +2% in FY25 to -6% in FY26, and the decline steepened through the year. Revenue fell 4.9% in the first half and 6.6% in the second, with weakness fairly evenly spread between Australia and NZ. The store count still rose, 214 to 217.

Series 5 is a fit-out concept going into both new and refurbished stores, with 53 open and 28 more scheduled for 1H FY27. It adds an in-store piercing studio, digital screens and stainless-steel finishes. No sales uplift is disclosed, and refits are framed as lease-renewal cadence rather than a programme.

Jewells profit drag remains steady in 2H. The underlying overlay that quantified it at the half — a $10.8m EBIT loss — was not repeated at the full year, although 2H losses were ‘similar’ to 1H. A second iteration has opened at Brent Cross this year (“initial signs are very encouraging”).

The EBIT growth hurdle has been missed two years running. Vesting cuts in at 18.5% growth on prior-year statutory EBIT and maxes at 30%; FY26 delivered 14.1% and FY25 8.2%, so nothing vested in either year. Executives' annual bonus is set on the same 18.5%-to-30% range.

Q: Was Jewells loss-making in the second half?
A: “We've not disclosed the second half. We did disclose it in the first half...our view would be a similar number in the second half to the first half...we're excited with the new trial that we've got in our Brent Cross store in North London...a somewhat different iteration to the first concept and the initial signs are very encouraging.”

Q: Similar pace of store openings in FY27?
A: “we opened 160 over the financial year. I would be looking to a similar number to that in the FY '27. We've got a good pipeline established...We know where we're getting good traction.”

Q: A similar pace of closures?
A: “No, no, no...I'm talking to store openings...We'll take a decision on stores if we need to close some, if we need to refit some we need to relocate some. But I really wish for you to focus more on we're looking at 160 new store openings for FY '27.”

Q: What is driving the ANZ decline?
A: “the most important thing I'd like everybody to acknowledge is we're a global business. We've got over 1,100 stores...we've got a very, very long runway of store openings...We're insulated in some regards, and we're naturally hedged in some regards to the business over in Australia and New Zealand. So I'd really prefer people to look at us as a global business.”

Q: Structural inventory efficiency or a one-off?
A: “We're always looking to improve our inventory efficiency...we've definitely made some improvements there. But a big part of that movement is just the movement in spot translation rates at the end of the financial year...You can see equivalent decrease in trade creditors and inventory on both sides of the balance sheet.”

Q: Will more operating leverage flow through?
A: “our focus is always to manage our cost of doing business as tightly as we can...If we can continue with that strong margin delivery that we continue to execute and we can manage our CODB tightly, we're all fully aware that the operating leverage of that will filter down to the bottom line.”

Q: Is the impairment charge repeatable?
A: “you can obviously see in the store count that we closed 43 stores in the financial year and relocated, I think it's 12. So that's mainly...loss on disposal where you close stores and you've still got a written down value, so you got to write it off...that number is just reflective of that number of store closures for the period.”

Q: Did tariff refunds help second-half margin?
A: “on a full year basis, the tariffs are in there and then they came back. So there's no impact from the tariffs in the full financial year. So there's a little bit of movement between the first half and the second half.”

Q: What uplift are Series 5 stores delivering?
A: “We don't give color in terms of the uplift we get from a Series 5 or whatever iteration. We don't give that level of detail...it's sufficiently acceptable for us to be rolling out 53 stores and to continue to roll it out in the next financial year...you have to keep reinvesting in your fleet and keep relevant.”

Q: Have US leasing terms improved?
A: “we would own and will continue to own that, in terms of what we can do inside our house, and that is to do with product allocation, marketing and retail operational standards. So rather than talk to what's happening with landlords and rents, we believe we've done an improved job.”

Q: No impediments to opening in the US?
A: “No. We're a well-represented brand over there. We are coveted by landlords to come into the centers...I've recently been over in the U.S. for 5 or 6 weeks. And I've got a landlord base who are hungry for the Lovisa business to be in their centers.”

Q: How much drag from ANZ refurbishments?
A: “There's not really a lot to see there...we renovate or refit a store when the lease comes up when we're negotiating with the landlords for renewal and we've got some tenure so that we can depreciate the capital...it's normal cadence or rhythm of the business is what we've been seeing in the second half.”

Q: Will gross margin seasonality return to historics?
A: “there was a little bit in the second half, but on the blended year, what came back, but there's nothing in the full year. Our focus is extensively will always be on markdown management and better products...our endeavor will be to continue to deliver acceptable gross margins for the shareholders.”

Q: Promotional activity or sourcing?
A: “I'm not trying to be opaque, but it's a combination of everything...if you put all the levers into better product, better buying, better quantification, lower markdown, better marketing, you get an outcome which is acceptable.”

Q: Any tariff impact expected in FY27?
A: “in the full year, there's no real impact from the U.S. tariffs because we paid them in the first half and then got some refunds in the second half. So it nets out to nothing in the full year...what comes in the next financial year, we'll see what happens in the U.S., but that's outside of our control.”

Q: How does the European store pipeline look?
A: “We're focused on what we can focus on. We know the representative countries well...We know how many stores we believe we can have in those respective countries, and we're just focused on delivering that number.”

Q: Any one-offs behind the stronger comps?
A: “we're cycling some big numbers because as we've called out this time last year, in the first 8 weeks, we're up 5.6%. So we're 3% up on the 5.6%. We've called out there's been improved momentum in the month of August...We're very cognizant of the numbers ahead in terms of what comp sales we're up against last year.”

Q: Have internal store hurdles become more stringent?
A: “Our internal hurdles have not softened...they'll continue to be the same. We simply believe that there's better quality stores that we can do deals on with landlords in better centers and better locations...We monitor the performance of those stores against their respective pro forma against their ROI and where we see there's a better opportunity, that's what we've been taking.”

Q: Are marginal new-store returns still consistent?
A: “that's not a simple question to answer...Things have changed a lot in the last 10 years in the business. So we just play every store as it comes and make sure it hits our return hurdles.”