As a new wave of the coronavirus ravages Europe forcing another round of mass shutdowns, jewelry retailer Lovisa (ASX: LOV) has capitalised on an opportunistic fire sale, acquiring German retailer beeline GmbH and 80 retail stores for just €60 (sixty Euros) and no debt.
Across Europe, beeline is expected to see big disruptions to its network which operates the SIX and I AM brands as a result of these shutdowns, hence its immaterial purchase price. The exit will shift rental liabilities on to Lovisa which has already forewarned they will shut some stores as current leases expire while those that are retained will undergo store fitouts to be rebranded as Lovisa stores in Germany, Switzerland, The Netherlands, Belgium, Austria and Luxembourg.
“We are very excited that this transaction gives us the opportunity to add six new countries to our global store network, and provides us with a strong base and quality team to grow the Lovisa brand further in these markets into the future as part of our ongoing global rollout strategy,” said Lovisa Managing Director, Shane Fallscheer.
As part of the deal, beeline will ensure a cash level of €9.87 million in aggregate across their six acquired entities but as part of the transaction, Lovisa will take over €3 million of bank guarantees.
When queried by analysts on an investor call this morning as to “what’s the catch”, Fallscheer referenced a strong culture at beeline where embattled management’s priority was to keep their store teams in meaningful employment.
Across the network of acquired stores, there is an average of 2-3 years until the next lease option of lease break with Fallscheer commenting that if Lovisa could have picked and choose which stores they would have acquired, there would have only been around 70% that they would have selected.
Within the acquisition, Lovisa has also entered into a Put Option agreement in relation to 30 stores in France will provide Beeline the option to sell shares in beeline’s France business to Lovisa with final details still being negotiated.
As disclosed in a recent trading update, Lovisa has already temporarily closed 24 of their stores in France and 39 in the UK as a result of Government-enforced lockdowns but has seen consistent sales from their Australian locations which were minimally impacted by the loss of Victoria’s Spring Racing Carnival – a traditionally strong trading period for the jewelry retailer.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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