LOV TA, page-13

I have been watching LOV for some time. I like their business model and can see that scale will enable them to buy better and more stores will increase revenue.

When you consider however that the average store turnover would be around $500k per annum, then I have calculated that they would need to sell around one piece of jewellery every 3 minutes for around $15. Thats a lot when you consider shopping centres have a lot of quite periods where shops have no one in them, so during busy periods they need to sell a lot more than this. I also went into one of their stores recently and noticed that they had a huge sale on, where most of the jewellery was selling for $4 and $8 per item. Its certainly a high turnover business, so busy locations would be key. This put me off investing in LOV due to their high valuation.

Also the factories that make this jewellery must employ people on wages that are extremely low, I am guessing under $10 per day, so not sure I feel comfortable with that.

I am not surprised that existing store sales are slowing and was taken back at the amount they are discounting during sale periods, when they already sell very cheap jewellery, as I wouldn't think they would need to.

Good overall opportunity for global expansion however, investors just have to work out whether in the short term a lot of the good news has been priced in.