Why this Undervalued ASX Dividend Stock Could be a Great Buy Right Now?

The recent share price pullback has made it an attractive time for investors to consider exposure to Lovisa Holdings as its valuation has become more compelling while the strong growth prospects remain intact.

Lovisa Holdings Limited (ASX: LOV)

Lovisa Holdings Limited (ASX: LOV) has a current market capitalisation of $2.47 billion and its FY26 half-year results showed that it continued to perform well even though the share price has declined a lot.

The stock is trading at $22.315 at the time of writing on 6 July 2026 which is well below the 52-week high of $43.68 and the current annual dividend yield is 3.59% which adds a passive income component alongside its long-term growth story.

The business in FY19 which was the last year before the impact of COVID-19 paid an annual dividend of 33 cents per share. The two most recent half-year dividends declared by the company amount to 80 cents per share which means that dividend has increased by about 140% over the past seven years.

Impressive Financial Performance

The company reported another excellent financial result during the first half of FY26 which highlighted the strength of its business model and the resilience of customer demand for its affordable fashion jewellery products. Total sales rose 23.3% compared with the prior corresponding period because of further expansion across the company's global store network. Comparable store sales increased 2.2% which shows that existing stores continued to attract customers despite a challenging retail environment.

Underlying revenue reached $498.1 million and Gross profit increased 23.4% to $412.9 million while underlying net profit after tax increased 21.5% to $69.6 million.

The company's ability to expand margins while also investing for future growth was perhaps even more impressive. Underlying gross margin improved by another 50 basis points to 82.9% after an already strong improvement in FY25.

A Global Expansion Story Is Still in Its Early Stages

International expansion is one of Lovisa's biggest strengths as the company finished the half year with 1,095 stores worldwide after opening 85 new stores. This was much higher than the 57 stores opened during the same period last year. Management also reported a solid start to the second half of FY26 as total sales during the first seven weeks increased 21.5%.

Europe was one of the fastest growth regions as sales increased 39.4% which was supported by 39 new store openings including faster expansion across the United Kingdom and Germany. The Americas also produced outstanding results as sales rose 37.6% alongside further expansion across both the United States and Canada. Lovisa now operates in more than 50 markets which gives management a significant opportunity for international expansion over many years.

The balance sheet also remained healthy as the company finished the period with $70.5 million in cash and maintained net cash of $12.0 million. It also extended its committed debt facilities for another three years with $120 million available to support future expansion whenever required.

Outlook

Lovisa is well positioned for long-term growth as it is poised to enter new markets while existing stores remain profitable. Margins have continued to improve and management has consistently executed its strategy across multiple geographies. Very few ASX retailers have built a global specialty retail network on this scale while also maintaining good profitability.

Management has stated that future dividend decisions will balance shareholder returns with investment opportunities. This approach will ensure the company retains enough capital to fund its global expansion while also rewarding investors as earnings continue to grow.

(Source: Company Announcements)