HLG - Hallenstein Glassons Holdings

[Basil]

At $6.85 I calculate based on the last 12 months earnings and gross dividends a historical PE of 12 and gross yield of 9.0%.  Actually, you can see that for yourself on Jarden's website.  Very attractive metrics for a well proven growth stock that has a huge future ahead of it in Australia.  Not forgetting no debt, ~ $50m cash on hand (~ 83 cps), superb management and a company that's quadrupled sales with Glassons Au over the last 8 years thanks to James Glasson's brilliance.    I think the correction is overdone and HLG are well placed and well-funded to grow in the years ahead. 

[winner (n)]

If Warren goingbto keep on selling Hickman's shares he's got 332,000 to go

Likely a case of 5 bucks here we come

[winner (n)]

From 31 March to 11 April Warren sold about 233,000 shares

Total market sales in that period about 375.000 shares ....so Warren's activity was over 60% of the total

No wonder share price going south

And he's got those 332,000 to go.

[winner (n)]

See the NZX top 5 losers today include Briscoes, Warehouse and HLG

Maybe nobody wants to be in retail at the moment.

[BlackPeter]

At $6.85 I calculate based on the last 12 months earnings and gross dividends a historical PE of 12 and gross yield of 9.0%.  Actually, you can see that for yourself on Jarden's website.  Very attractive metrics for a well proven growth stock that has a huge future ahead of it in Australia.  Not forgetting no debt, ~ $50m cash on hand (~ 83 cps), superb management and a company that's quadrupled sales with Glassons Au over the last 8 years thanks to James Glasson's brilliance.    I think the correction is overdone and HLG are well placed and well-funded to grow in the years ahead. 

I know - I guess based on the assumption that nothing changes, they do appear to be reasonably priced. But, when was the last time you remember, when  nothing changed? Pandemics, Tradewars, weather related catastrophies, cost of living crisis - it all just happened without due warning (though a cyclical history and science gave some warning flags).

Nobody knows when the next black swan passes by and how it will look, but we have currently some significant black swan generators operating, and we know that a fairly priced rug trader selling non-essentials will be more likely to get a hit than somebody producing or selling essentials. So - maybe this is not just a short correction, but the market is adding a risk discount to the share price?

Just wondering, how rugtraders like HLG fared during the 1930íes? Anybody knows? Most fotos from these days seem to show people in uniforms. Maybe some idea to diversify?

[BlackPeter]

Actually - just noticed that analysts seem to get cold feet as well. Interesting to compare the March and the April recommendations:

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[KW]

Bouncing off support at present and clawing its way back to the 200 day MA.  Will it hold?  Bit of a hard ask in this market, so no prediction here. 

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[Greekwatchdog]

This is For Bars latest from 31st March

Hallenstein Glassons (HLG) 1H25 result had few surprises, given earnings guidance provided in February 2025. The divergence in its NZ businesses and Glassons Australia remains evident, with sales in the former broadly flat while the latter was up +16% on the prior year. Trading through the first seven weeks of 2H25 was +5% on the prior year, though promotional activity and a weaker NZD is expected to weigh on gross margins. While there is likely to be some near-term volatility in the NZ businesses, Glassons Australia continues to go from strength to strength, with: (1) annual same-store sales growth >10% over the last three financial years; (2) two net new store openings signalled for 2H25; and (3) the distribution centre project likely to enable the next leg of store growth. We continue to view the risk–reward as attractive, with HLG trading on c.11x two-year forward PE, below its long-run history. OUTPERFORM.

What's changed?
Earnings: Minor NPAT revisions of -1%/+1%/+1% from FY25 to FY27 respectively.
Target price: Increases +3% to NZ$10.00
A tale of two countries
HLG reported 1H25 NPAT of NZ$21.2m, broadly flat on the prior year. Momentum continues in the Glassons Australia business, with total sales up +16% to NZ$124m, including same-store sales growth of c.+10%. Glassons Australia delivered 1H25 NPAT of NZ$11.8m—more than half of group NPAT. While Glassons NZ and Hallenstein Brothers sales were flat in the half, this compares to Stats NZ retail card spend on apparel over the same six-month period, which was down -3% on the prior year.

Margins in focus
Gross margin pressure has been most acute in Hallenstein Brothers, down c.260 bps on the prior year—primarily driven by a more price-sensitive male consumer in New Zealand. Glassons NZ and Australia gross margins were more resilient, with the former improving by c.40 bps, while the latter was broadly flat on the prior year. HLG expects gross margin pressure to continue over the balance of 2025, as the retail environment remains subdued and a weak NZD impacts inventory purchasing costs.

Driving growth in Australia: OUTPERFORM
HLG reported 1H25 results in line with expectations. Key points below:

Glassons Australia: Sales up +16% to NZ$124m, gross margin fell 2 bps to 61.1%, while NPAT rose +9.0% to NZ$11.8m.
Glassons NZ: Sales up +0.2% to NZ$57m, gross margin increased +36 bps to 55.0%, and NPAT increased +18% to NZ$6.7m.
Hallenstein Brothers: Sales up +0.1% to NZ$59m, gross margins fell 260 bps to 56.2%, and NPAT -43.6% to NZ$2.5m.
Balance sheet: Net cash balance of NZ$50m (1H24: NZ$43m). Inventory levels increased to NZ$27m from NZ$23m in 1H24.
Outlook: Trading through the first seven weeks +5.4%, and margins remain under pressure. HLG expects volatility to continue for the remainder of FY25, given economic uncertainty in NZ, AU and globally.
We continue to view the risk–reward as attractive, given the momentum in the Glassons Australia business. On our revised estimates, HLG is trading on c.11x two-year forward PE, below its long-run average. OUTPERFORM.
Australia awaits

The opportunity in both Glassons Australia and Hallenstein Brothers Australia will drive the next step change in HLG's earnings. On a population-adjusted basis—assuming half the store-to-population density of their New Zealand counterparts—Australia could support c.80 Glassons Australia stores (currently 40 stores) and c.90 Hallenstein Brothers stores (currently five stores). HLG noted at its AGM in November 2024 that it could open two to five Glassons Australia stores per year to reach 50 stores over the medium term.

Earnings changes
Minor earnings changes across the forecast period, with NPAT -1%/+1%/+1% from FY25 to FY27. Better-than-expected trading in Glassons NZ and continued growth in Glassons Australia were the key drivers of the upward revisions from FY26 onwards. We had already expected some margin pressure in 2H25 but have reduced our gross margin forecasts further for Hallenstein Brothers in particular. We increase our dividend assumptions across the forecast period, reflecting a higher payout in FY25 and higher earnings in FY26/27.

DISC. Not a holder

[Basil]

If Warren goingbto keep on selling Hickman's shares he's got 332,000 to go

Likely a case of 5 bucks here we come

I love you mate because you're so transparent.  5 minutes ago, it was $9 here we come and now its $5 here we come.  It's as clear as day you have sold lol.  For sure, I am well aware of the significant market pressure that sell down has created.

[Basil]

I know - I guess based on the assumption that nothing changes, they do appear to be reasonably priced. But, when was the last time you remember, when  nothing changed? Pandemics, Tradewars, weather related catastrophies, cost of living crisis - it all just happened without due warning (though a cyclical history and science gave some warning flags).

Nobody knows when the next black swan passes by and how it will look, but we have currently some significant black swan generators operating, and we know that a fairly priced rug trader selling non-essentials will be more likely to get a hit than somebody producing or selling essentials. So - maybe this is not just a short correction, but the market is adding a risk discount to the share price?

Just wondering, how rugtraders like HLG fared during the 1930íes? Anybody knows? Most fotos from these days seem to show people in uniforms. Maybe some idea to diversify?

No argument there's plenty of ructions in international markets at the moment and there will be some impact on consumer confidence in Australasia, but I suspect that young people buying cheap clothes to make themselves look cool don't really worry about these things nearly as much as you and I.  Maybe the trade tariff thing gets sorted out sometime in 2025 and maybe a reduction in eps of a few cents a share this year.  Not much in the long-term scheme of things when you look at Glasson's Au proven growth rate over the last 8 years is it.  So, lets trim for arguments sake, 4-5 cps off this year's earnings and the same off 2026 eps and that affects their DCF valuation by sweet bugger all, is my thinking.  Each to their own, its hard-to-find good growth stories, with well proven management and a fortress balance sheet trading on compelling metrics.

Anyway, leaving aside what you and I think here's what the analysts think.  I note an average target price of $9.25 and some very interesting dividend growth forecast in the next two years.  https://www.marketscreener.com/quote/stock/HALLENSTEIN-GLASSON-HOLDI-6495564/finances/  Maybe that growth will be a bit lower than analysts were thinking but the key difference between you and I seems to be that I think the long-term growth story remains intact and you don't.

[Fiordland Moose]

Unpredictable dynamics at the moment. Hickman sell down, crazy trump tariffs, etc. rising fx for sure a positive if maintained. Some of the ASX retailers SPs have been hit hard...reportedly in the AFR there has been some targeted short selling of australasian retailers out of fear of Chinese/Asian dumping of products being redirected from America. Crazy times (as they always seem to be lately).

[Basil]

HLG have demonstrated very good level's of resiliency throughout all the challenges of the last 5 years, (Covid and the almost endless recession that's followed)  Not quite as resilient as Turners but they set an incredibly high bar.  I think they're well positioned to weather this latest challenge better than most.    For quite some time they were broadly matching UNI in Australia for price, (which I note is up nicely today to A$7.65) but I think HLG's balance sheet is stronger, and HLG's store expansion plan is far more conservative than UNI.  UNI trading on 23 times last years earnings, nearly double the metrics of HLG.

[Greekwatchdog]

The unpredictable dynamics currently in the market gives all investors and opportunity to make money.

The medium to long term players have to decide if they can withstand these dynamics and are prepared to sell/hold/add during these times pending their respective Philosophy for that respective stock.

Then you have those who play the stocks daily who trade daily to try and make a quid.

Each to there own, but remember there are always those who see value when others don't.

[BlackPeter]

Bouncing off support at present and clawing its way back to the 200 day MA.  Will it hold?  Bit of a hard ask in this market, so no prediction here. 

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Interesting - I didn't notice that before, but this chart shows a beautiful head and shoulders pattern, but hey - TA is only for the faint hearted ... and only reliable with the benefit of hindsight.

[Greekwatchdog]

Plenty of chat on retail lately. Here is For Bars uptake on retail in general. Possible could look at starting Generic Retail thread?

It has been a volatile few years for NZ listed retailers, with Trump's reciprocal tariffs providing the latest shock for the sector. While retailers that import into the US may face new costs, NZ retailers sourcing from China could benefit from excess manufacturing capacity and lower input costs. Although the tariff situation remains fluid — Trump has noticeably softened his rhetoric on reciprocal tariffs in recent weeks — this note seeks to provide context for how NZ listed retailers would respond to further changes in the global trade system. Our analysis of listed retailer supply chains, end markets, and sourcing locations found that (1) a -1% reduction in China sourcing costs could increase sector gross profit dollars between +0.2% to +1.1% (all else equal), and (2) KMD Brands is in a better position to mitigate tariff-related headwinds than initially anticipated. The latter reflects better-than-anticipated flexibility in its supply chain, including the ability to redirect Chinese-sourced product to non-US markets, while fulfilling US demand from other lower-tariff sourcing countries.

What could cheaper product sourcing costs mean for the NZ listed retail sector?
Disclosure of product sourcing is inconsistent across the retail sector, both in terms of granularity and the metrics disclosed. However, our analysis confirmed that China is a major sourcing partner for NZ listed retailers (noting that no data was publicly available for BGP). Specifically, China (1) accounts for c.35% of KMD's spend on branded product, (2) is the sourcing origin for c.63% of WHS's sales in Red and Blue Sheds, and (3) is home to c.70% of HLG's sourcing factories. A full breakdown of our estimates of sourcing country is provided in Appendix 1. Should trade tensions between China and the US remain elevated, we expect excess manufacturing capacity to place downward pressure on sourcing costs. We estimate that a -1% reduction in Chinese sourcing cost could result in a 15 - 40 bps gross margin benefit, or a +0.2% to +1.1% increase in gross profit dollars, all else equal.

More confidence in KMD's ability to offset the tariff impost
We expect KMD will be able to offset two-thirds of the total tariff impact (up from our previous estimate of half), and increase our target price +NZ 5 cps to NZ$0.53 accordingly. KMD has c.19% revenue exposure to the US market through Rip Curl (c.12%) and Oboz (c.7%). China is a significant sourcing country for Rip Curl (accounting for c.45% of supplier factories), while Oboz has a lower dependency (c.23%). Notably, China-sourced goods are primarily apparel, which can more easily be relocated to other textile markets. In contrast, technical products such as Rip Curl's wetsuits (Thailand), and Oboz footwear (Vietnam) are harder to shift. Despite ongoing volatility, we have increased confidence in KMD's ability to mitigate potential tariff-related headwinds given (1) Trump's softened stance towards key trading partners (excluding China) and relatively lower tariffs on other key textile nations (Bangladesh, India, and Vietnam), and (2) greater supply chain flexibility with the ability to redirect China-sourced product to other international markets, while meeting US demand through alternative low-tariff sourcing locations.

China is a major sourcing country for all retailers under coverage
Supplier disclosure is inconsistent across the sector, with BGP providing no publicly available data. Figure 2 summarises our estimates of supplier and manufacturer locations by continent. The reporting metric used also varied by company. KMD Brands reported its percentage spend on branded product in 2024 at the group level, however, disclosure at the individual brand level was less granular, with our estimates based on number of factories in each region (Open Supply Hub) and no adjustment for the expected volume that is supplied from those factories. HLG also provides only the number of factories by location. WHS reported the percentage of product sold in Red and Blue sheds by sourcing location in its Ethical Sourcing Report from 2023. A more detailed breakdown of supplier locations is available in Appendix 1.

Unsurprisingly, Asia is the primary supplier and manufacturing continent for all listed retailers under our coverage. China in particular features heavily, accounting for (1) c.35% of KMD's spend on branded product, (2) c.63% of sourcing for WHS's sales in Red and Blue Sheds, and (3)  c.70% of HLG's sourcing factories.

Lower sourcing costs from China would benefit NZ listed retailers
If trade from China to the USA slows materially, we expect surplus manufacturing capacity in China to place downward pressure on sourcing costs for global retailers. Based on our estimates of Chinese-based sourcing above, we estimate that a 1% decrease in China sourcing costs could increase gross margins across the sector by 15-40bps and increase gross profit dollars by 0.2%-1.1% (assuming all else equal). WHS would be the largest beneficiary, due to its high cost of goods as a percentage of sales and large sourcing exposure from China. Any potential reduction in sourcing costs will be lagged due to the time required to turn inventory. Retailers with slower inventory cycles — KMD, WHS and BGP — are likely to realise benefits more gradually than faster inventory turn retailers (HLG).

KMD is the only retailer under coverage with material US exposure
KMD is the sole listed retailer under our coverage that has material revenue exposure to the US. In FY24, 23% of Rip Curl's sales were into the US (c.12% of total group sales), while c.83% of Oboz's sales (c.7% of group sales) were into the US. Briscoes Group (BGP) and the Warehouse Group (WHS) are 100% domestic retailers, while HLG has both NZ and Australian exposure.

Re-basing our KMD Brands tariff estimates
In our report 'Riding the Tariff Wave' released 9 April 2025, we estimated the unmitigated tariff impact of Trump's reciprocal tariffs on KMD to be approximately NZ$20m post-tax. The tariff landscape remains dynamic, with a 90 day pause on all reciprocal tariffs being recently enacted, alongside a 10% import tariff applied on all countries except China. Once this pause ends, we expect further changes to the global trade and tariff regime. Encouragingly, Trump has shown he is willing to negotiate on tariffs, and KMD's longer inventory lead times into the US provide a buffer period for global economies to negotiate trade and tariff deals with the US.

China is a major sourcing country for Rip Curl and a smaller sourcing country for Oboz. At face value, this raises concerns over sourcing cost pressures on US-bound product, however, flexibility in KMD's supply chain should be able to mitigate tariff-headwinds. Most of the Chinese-sourced goods for Rip Curl and Oboz is apparel— which can be redirected to other textile hubs like Bangladesh, Vietnam, or India. By contrast, more technical products—Rip Curl's wetsuits (Thailand) and Oboz's footwear (Vietnam)—are less mobile.  Furthermore, Chinese production capacity contracted by KMD can be reallocated to supply non-US markets, while product for the US can be sourced from other, lower tariff countries.

Recent policy developments and further analysis of KMD's sourcing options gives us greater confidence that (1) KMD is well positioned to mitigate tariff exposure from Chinese-sourcing, and (2) Rip Curl and Oboz can maintain US market presence, assuming alternative sourcing nations continue to have more favourable tariff treatment. As a result, we revise our offset estimates upward, from c.50% to approximately two-thirds of the unmitigated tariff impact.

Earnings changes
We revise our forecasts in light of our more positive view on KMD's ability to offset tariff impacts. We now expect that KMD will be able to offset two-thirds of our unmitigated tariff impact estimate of c.NZ$20m, or only incur a NZ$7m post-tax impact from increased tariff costs. This assumption broadly equates to a c.10% tariff across all products into the US (NZ$10m increase in COGS based on the c.NZ$100m cost of goods for products into US). We reinstate a KMD FY26 dividend of NZ 1.5 cents per share given improved profitability in that period. Improved profitability also eases pressure on key balance sheet metrics.