Over the past few years, Lovisa Holdings Ltd (ASX: LOV) shares have been a favourite among retail investors. 

But this year, Lovisa's share price has taken a hit, falling 22% for the year to date. It has substantially underperformed the S&P/ASX 200 (ASX: XJO), which has declined around 5% over the same period.

ASX investors may be wondering whether this is a buying opportunity or a sign of further troubles to come.

Let's take a look at the bull and bear case for Lovisa shares.

The bull case

Since being founded in 2010, Lovisa has been a remarkable growth story. Today, it operates 943 stores across Asia, Europe, and the US. Its journey is far from over, with the company planning to add around 600 stores over the next 5 years as well as expand its online presence.

Lovisa's core product offering is fast fashion jewellery. Items typically range from $5 to $50. Its major target market is young women aged 15 to 30 who are looking for trendy and affordable accessories. Lovisa's success lies in its ability to identify trends early and have products in store quickly. This typically takes between 6 and 8 weeks. To achieve this, the company monitors catwalk fashion shows, high street retail, and tabs on A-list celebrities and influencers. Historically, this has been a resilient business model, as it's not reliant on a specific fashion trend or particularly sensitive to economic conditions.Lovisa is often named by leading brokers as a top buy recommendation. Recently, Macquarie cited Lovisa as its third pick in the retail sector with a price target of $33.40.

The bear case

Despite these advantages, Lovisa has suffered several setbacks recently. 

Most recently, its share price fell 6% in one day after Donald Trump's tariffs were announced. With its products primarily sourced from China and its dominant market being the US, the US-China trade war is bad news for Lovisa. 

There's no doubt Trump's tariffs will impact Lovisa's profitability. The company will need to either absorb the levy or pass it on to consumers. As a discount retailer, higher prices are likely to weigh heavily on demand. The company is in a tough spot. 

However, tariffs are not the only issue facing the business. Last year, it was revealed that former Lovisa CEO Shane Fallscheer had launched Harli + Harper, a direct competitor to Lovisa. While retail is a notoriously competitive industry, the market appears to be particularly concerned about the similarity between Harli + Harper and Lovisa.

Finally, Lovisa's incoming CEO, John Cheston, faced controversy last year. The former Smiggle boss was dismissed for 'serious misconduct' after 12 years in the role. Smiggle is a stationery retailer owned by Premier Investments (ASX: PMV). While Cheston remains on track to begin his new role in June, it is not entirely clear why he was suddenly sacked from his previous role. This may not sit well with investors. 

Lovisa shares Foolish takeaway

Lovisa's share price has underperformed the market this year. While the company has an excellent long-term track record, it has encountered several setbacks over the past 12 months. Investors who believe these setbacks are overblown have a chance to buy Lovisa shares for 22% cheaper than at the start of the year.