Retail Stocks

[arekaywhy]

do you think our fiat, debt based currency has anything to do with it?

I mean, massive debasement of currency is what the "poor" are dealing with for purchasing power, and for the "rich" they are offloading the queen's vouchers as fast as possible and swapping them for things that they actually want

[Basil]

do you think our fiat, debt based currency has anything to do with it?

I mean, massive debasement of currency is what the "poor" are dealing with for purchasing power, and for the "rich" they are offloading the queen's vouchers as fast as possible and swapping them for things that they actually want

LOL you're not wrong about that !

[KW]

Retail spending is suggesting we are already in recession (I believe we are, regardless of which wonky definition the Govt prefers to use).
https://www.interest.co.nz/business/117341/economists-surprised-fall-retail-spending-june-quarter-which-raises-possibility

a few nasty results out in Australia, KGN and CCX both suffering from overstocking inventory and the cashflow woes that come as a result. 

[Basil]

Thanks KW, interesting article and some very interesting comments in the comments section below.

Its crystal clear we are seeing a real bifurcation in retail spending between the have's and the have nots.
Not many left in the middle any more.

[Left Field]

Hallensteins latest trading update FYI..... margins under pressure.

https://www.nzx.com/announcements/397702

The Company advises that Group sales for the 12 months ended 1 August 2022 were $351.21 million, an increase of 0.1% on the prior year ($350.76 million).

Group net profit after tax is expected to be within the range of $23.9 million to $24.9 million, a decrease of approximately -26.8% on the prior year ($33.3 million).

[Basil]

Be remiss of me if I didn't share a few thoughts on HLG that's been so good for me in years gone by.
Looking at this through the lens of consumers really feeling the pinch with the cost of living crisis really driving a bifurcated market and huge wedge between the have's and the have not's who are either broadly unaffected or seriously affected by financial pressures.

Anecdotally an interesting comment out overnight from GAP that demand in the middle of the apparel market (where they and HLG broadly sit), is weak.
I think Dollar General also warned overnight on Wall St, saw something on CNBC early this morning, (I was a bit sleepy at the time so might have this wrong).

What I think is happening is the have's are still buying their luxury goods, (some high end brands seem to be doing well) and the have nots are closing their wallets and just surviving, (food, transport and shelter basics only) or if they are buying they're moving down-market to very cheap generic brand clothing.  The mid point consumer is being squeezed so hard in my view they're less inclined to buy middle of the market apparel and that headwind doesn't look like abating anytime soon.

Going forward I expect a considerable delay between cost of living pressures and consumers response with the year ahead fully reflecting those pressures and only a very modest impact reflected in HLG's current year reporting.
Its also clear HLG are being impacted by cost of doing business pressures with rising rents, staff costs and supply chain cost pressures.

While headline sales are flat its well worth noting they are down 7.2% in real inflation adjusted terms.  (We need to be thinking carefully about inflation adjusting top and bottom line reporting due to the serious extent of it these days).

At the mid point they are forecasting $24.4m for 40.9 cps.  I'm inclined to think demand in the year ahead in the mid price point apparel market will be muted.  Its not clear when things will get back to "normal" and Glassons can return to eps growth.
What's absolute clear from a net income perspective to dividend hounds is future dividends will continue to only be partially imputed.

At $5.60 they trade on 13.7 times FY22 earnings and with no immediate catalyst for earnings growth, (the possibility of earnings declining further in FY23 cannot be ruled out), so they look very vulnerable to an ongoing decline in my view.

I would need to see them on a considerably more attractive multiple given clear headwinds in the foreseeable future to jump back in.
I'm content to sit on the sidelines here for the foreseeable future and wait for more promising times to emerge or the price to more correctly reflect the significant challenges ahead.   I think we could see low $4's at some point.  Good luck to holders.

[winner (n)]

Impact of a bifurcated market shows up in this chart from ANZ from this months Roy Morgan Consumer Confidence poll

Markedly different responses from those with or without mortgages ...those without mortgages might buy a major household item ..those with mortgages still in the doldrums

You cannot view this attachment.

[KW]

Markedly different responses from those with or without mortgages ...those without mortgages might buy a major household item ..those with mortgages still in the doldrums

That is only going to last until rents start going up over the next year as (a) higher interest rates kick in to investor loans, and (b) interest deductibility moves from 75%  deductible to only 50% deductible. 

[Left Field]

Briscoes results to 31 July just out.....

https://www.nzx.com/announcements/398748

Highlights for the 26-week period – 31 January 2022 to 31 July 2022:
• Total sales $367.95 million, +2.66%
• Online sales as mix of total Group sales, 19.36%
• Online sales growth +22.93%
• Gross profit % 45.64% vs 46.50% last year
• Net profit after tax (NPAT) $45.62 million, -3.88%
• Interim Dividend 12.00 cps increased from 11.50 cps last year

[KW]

Now that masks are no more, consumers will return to the shopping malls and stores should find it easier to recruit staff.  But it all may be a little too late, as inflation decimates people's spending power.  

Also a reminder that nationwide rent increases will start in October, as landlords seek to recoup higher interest costs and taxes.  That's going to bite.   

[Left Field]

Now that masks are no more, consumers will return to the shopping malls and stores should find it easier to recruit staff.  But it all may be a little too late, as inflation decimates people's spending power. 

Also a reminder that nationwide rent increases will start in October, as landlords seek to recoup higher interest costs and taxes.  That's going to bite.   

Covid has changed shopping patterns as the increase in Briscoes online shopping shows.

More internet, less bricks and mortar retail. Landlords may struggle to get the retail rent increases they want.

Retail is a fickle market especially in these times.... thankfully  I'm just a side line observer.

[winner (n)]

Covid has changed shopping patterns as the increase in Briscoes online shopping shows.

More internet, less bricks and mortar retail. Landlords may struggle to get the retail rent increases they want.

Retail is a fickle market especially in these times.... thankfully  I'm just a side line observer.

Briscoes change in instore/online mix over last few years is quite dramatic

Since January 2019 annual online sales have grown from $63m to $173m as at July this year - up $110m or 175%

In same 3 1/2 years in store sales have grown by $13m (2%) to $581m and are still about the same as they were at January 2020

Just highights how the online channel has been the saviour of Briscoes over the last couple of years

I'd hazard a guess that shopping habits have changed and online activity is here to stay .... but physical stores still an important part of the overall mix .... both for the shopping experience and 'click and collect'

[KW]

I was in there the other day, and like everywhere else, I went in, got what I came for, paid and then left as quickly as possible.  Normally I would wander around for half an hour and see what else they had on special, and if anything caught my eye.  I also noted that they are charging $3 for click and collect, which is a bit on the nose.  Its almost as if they don't want people to enter their store, and just order online (for an extra $4).  

[lorraina]

Your reputation is now in doubt.
I find it hard to believe a shopaholic like you, did not loiter with intent for at least half an hour.

[KW]

Your reputation is now in doubt.
I find it hard to believe a shopaholic like you, did not loiter with intent for at least half an hour.

I have forgotten what its like to loiter with intent.  I guess Costco is opening at the perfect time - there is no better place to loiter, you'll be sure to discover something you never knew you needed lol