HLG - Hallenstein Glassons Holdings

[Umpah]

Thinking about some of the comments a share split would be of benefit to traders not long term investors a company's focus would be on the latter not the former

[Fiordland Moose]

decent article about the mechanics and marketing of women's fast fashion in Australia

https://archive.is/20250908203040/https://www.afr.com/companies/retail/princess-polly-rakes-it-in-by-landing-on-every-young-woman-s-feed-20250903-p5ms35

NB noticed I cant get the website to work. Copy and paste the link below into removepaywalls.com and you should be able to read
https://www.afr.com/companies/retail/princess-polly-rakes-it-in-by-landing-on-every-young-woman-s-feed-20250903-p5ms35

[Basil]

According to the NZX competition on the other channel, inclusive of the dividend paid in April HLG only up 8.5% YTD i.e. people haven't missed the boat despite how well HLG are performing..  Backing out an expected ~ 33 cent FY25 final divvy, at a net $8.43 invested ($8.76 less 33 cents back for FY25 final divvy), for FY26 and beyond investment case and income, based on Forsyth Barr's forecasts HLG metrics are as follows:-
FY26 EPS 75.1 DPS 64.0 with 75% imputation gives a PE of 11.2 and Gross Yield of 9.6%
FY27 EPS 82.8 DPS 70.5 with 75% imputation gives a PE of 10.2 and Gross Yield of 10.6%
5 Year EPS CAGR is 9% as mentioned previously.

My hope is they don't pay out quite that much and use the earnings to accelerate the expansion of Glasson's Australia stores.   Directing virtually all future investment to Glassons Au makes really good common sense to me.  (They have approx. the same number of Glassons stores in N.Z. as Australia despite there being 5.3m people here and approx. 27m people and a far stronger economy there).  The size of the total addressable market and scope for a very long runway of growth is perfectly clear to me.  Also, Australia is simply a more wealthy country than N.Z. and a better case for return on capital invested.

The metrics and growth story look compelling to me.  HLG Australasia's most attractively priced growth company ?  Looking forward to the annual result on Friday.

[Ferg]

Do you see headwinds with the NZD/USD cross rate for margins?  If NZ interest rates fall relative to USD that could see a lower NZD -> higher COGS % for the likes of HLG.

[Basil]

That's certainly possible and a key risk Ferg but we're not far off the ten year average v the $US and the US are talking about 2-3 cuts this year and more cash rate cuts next year.  Also their debt to GDP is a whopping 122% and we're about 40% so the chance of the US dollar declining in value on a trade weighted basis over the medium term is something that I see as very much on the cards too.  You might find this interesting.  https://worldpopulationreview.com/country-rankings/debt-to-gdp-ratio-by-country

[winner (n)]

Do you see headwinds with the NZD/USD cross rate for margins?  If NZ interest rates fall relative to USD that could see a lower NZD -> higher COGS % for the likes of HLG.

Good question Ferg

Based on 6 monthly results since 2007 sometimes HLG GM% falls when the NZD falls, sometimes the HLG GM% rises when the NZD falls, sometimes the HLG GM% rises when the NZD goes up and sometimes the HLG GM% falls when the NZD goes up

Suppose it all comes down to well HLG manage things .... ie pricing as well as a bit of hedging.

In saying that over the period since 2007 there has been a weak (about 20%) negative correlation between the two

But interesting is that since 2014 the NZD has trended down from 82 to its current 58 but HLG GM% has generally ranged 58%/60%..... and currently higher than it was in 2014

Yes if the NZD falls a risk to HLG margins but they seem to manage those risks well.

[entrep]

On NZD/USD, I see the USD as being structurally weak into the foreseeable future. However, NZD/USD is also under 60 cents which is IMO overly strong when considering history. So strengthening NZD vs USD makes sense.

[winner (n)]

We'll know on Friday but they did say FY25 gross margin % was consistent with the prior year.

That implies H2 GM% was higher than H1 which a great effort

Also during FY25 NZD a bit weeker than FY24 period so consirsten GM% pretty good effort .... sign of good management////*/

[Basil]

This is the oldest annual report I can find online, 2011  https://www.hallensteinglasson.co.nz/annual-report/2011 This is back in the day when they were a no growth mainly N.Z. cyclical company but it has 7 years of figures going back to 2005, (see page 5) and they seem to have done okay in all those years with varying exchange rates.  I can recall a major business deal I was working on, from memory 2000 or 2001 that went pear shaped because the Kiwi fell out of bed to reach a low of 40cents $US just in the final stages of negotiations.  Wonder how HLG coped with an exchange rate like that in those years ?  Must have managed it okay because they're still here and have been for many decades, (NZX's oldest listed company)
Anyway...here's a 34 year chart from 1991 to date of $Kiwi v $US.  Think I read somewhere the average over the long run has been about 62 cents.  https://www.macrotrends.net/2557/new-zealand-us-dollar-exchange-rate-historical-chart#google_vignette

[entrep]

My hope is they don't pay out quite that much and use the earnings to accelerate the expansion of Glasson's Australia stores.   Directing virtually all future investment to Glassons Au makes really good common sense to me.  (They have approx. the same number of Glassons stores in N.Z. as Australia despite there being 5.3m people here and approx. 27m people and a far stronger economy there).  The size of the total addressable market and scope for a very long runway of growth is perfectly clear to me.  Also, Australia is simply a more wealthy country than N.Z. and a better case for return on capital invested.

Don't most New Zealand companies go into Australia thinking the exact same thing, only to get horribly burnt and waste a ton of money?

[Basil]

Harsh but true.  I believe more than 50% of companies expanding in Australia fall on their face but have a look at posts #1307 and #1319 in this thread.
Glassons Au sales have grown at a CAGR of 21% per annum for the last 5 years.  That speaks for itself but if you want to look back further DYOR and check out what Glassons Au sales were in 2016 and what they are now when they report their annual result on Friday.  The growth has been absolutely outstanding and transformative.  What was once ostensibly a no growth N.Z. cyclical apparel company is now an outstanding Australasian growth company, (still priced as though it has very little growth).

[winner (n)]

Full year results published tomorrow ...just the detail as we know the answers already

Main part is how big X is in 'Sales for first seven weeks of new year were X% up on pcp'

Expectations are high as KMD said Kathmandu same store sales for first seven weeks  were up 22% on last year

Jeez if Kathmandu can do do 22% the mind boggles what HLG will do

Looking forward to an out sized X tomorrow

[Basil]

I thought KMD said sales were up 10.5% ?
I didn't read any further so maybe they closed down a number of stores ?

Anyway, August a big month for KMD winter gear sales so not sure we can draw parallels.

Amoung many other things, I'm looking for details of the dividend and imputation level, how many new stores they opened during the year, divisional profitability within the business, sales growth with Glassons Au, sales info FY26 year to date,  any colour around their plans for store expansion in FY26 and beyound and the detail of their record ever cash on hand at balance date. A share split announcement would be very welcome.

Forsyth Barr forecasting sales in F26 will be up 7.9% to $507m. Some will recall their target price of $10.80.

[Basil]

My computer in the shop for an upgrade. Will post more detailed thoughts on the weekend.

First impressions. A very strong result at the top end of guidance range. Dividend about what I expected. Imputation level a little lower than ideal.

Glassons N.Z net profit surprised to the upside, very good. Hallensteins continues to disappoint as expected.

Glassons Au continues its 9 year strong growth performance and I expect that to continue in the future.

Sales growth year to date at 12.9% is well ahead of analysts and my expectations.

Holding a record, by a long way, $58m cash on hand at balance date is very close indeed to the $1 per share I was hoping for. They are very well placed to grow in the years ahead.

Remarkable performance in a very weak economy.

[Dolcile]

I'm curious, does anyone know how much of the $15m annual capex (per cash flow statement) is growth versus refurb/lights on?