HLG - Hallenstein Glassons Holdings

[winner (n)]

Stock turns up to 6.6 times per year

Every 8$1 of stock held generates a whopping $9.66 of Gross Margin

No wonder they make heaps

[Dolcile]

Those financials a pristine 

[Ferg]

Nice growth in Oz but also nice cost control in Glassons NZ where sales were up 1.7% (~$1.9m) but NPBT was up 27% or $4.2m.

[Fiordland Moose]

Nice growth in Oz but also nice cost control in Glassons NZ where sales were up 1.7% (~$1.9m) but NPBT was up 27% or $4.2m.

Also to note Glassons NZ GP margin has much improved...2H FY25 was 58.1%, vs 56% in 2H FY24 (not meaningful to compare to 1H as Glassons NZ has the most seasonality of all the brands and most pronounced lift in GP relative to 1H).

Glassons NZ GP has been the problem child for the group - been on a steep downward trend since FY18, bottoming out in FY22/FY23, and upward trend since. Best 2h GP% in 5 years, getting back to FY20 levels.

[winner (n)]

That +15% growth fromn Glassons AU was achieved in a market which grew by just under 3%. Market being household spend on clothing.

Big market share gains

Likely to continue

[winner (n)]

That +15% growth fromn Glassons AU was achieved in a market which grew by just under 3%. Market being household spend on clothing.

Big market share gains

Likely to continue

And healthy sign was that that 15% growth was spread over the full year H1 and H2 growth basically the ...and no doubt up at least 15% so far in FY26

[Basil]

According to market screener average analyst forecasts for FY 26 and FY 27 was for 6.5% sales growth to $501m and approx 5% in FY27 to $527m.

This to lead to eps of 77 and 85 cps respectively.

On the face of it those sales estimates look too conservative and I think we are likely to see analyst upgrades on Monday.  Forsyth Barr already at $10.80 fair value.

The business appears to be in great shape and if we get decent cuts from the RBNZ we might finally emerge from years of recession. HLG has managed all the challenges of the last 5 years extremely well.

Can't decide if I prefer this to TRA or not. Gosh there's so much to like about both. Solution. Make them equal #1 largest portfolio position. 

[Pierre]

Can't decide if I prefer this to TRA or not. Gosh there's so much to like about both. Solution. Make them equal #1 largest portfolio position. 

I already have!

[Dolcile]

According to market screener average analyst forecasts for FY 26 and FY 27 was for 6.5% sales growth to $501m and approx 5% in FY27 to $527m.

This to lead to eps of 77 and 85 cps respectively.

On the face of it those sales estimates look too conservative and I think we are likely to see analyst upgrades on Monday.  Forsyth Barr already at $10.80 fair value.

The business appears to be in great shape and if we get decent cuts from the RBNZ we might finally emerge from years of recession. HLG has managed all the challenges of the last 5 years extremely well.

Can't decide if I prefer this to TRA or not. Gosh there's so much to like about both. Solution. Make them equal #1 largest portfolio position. 

Like you I hold both, but definitely more confident in / prefer Turners.   And the fully imputed dividend is a nice kicker. 

[Basil]

Just going to re-post this extract from a post I made in the dividend hound thread so people can appreciate the growth of Glassons Au over the years.

Its very important with income investing to not just focus on the current return but to think about how its going to grow over time.

Maybe a worked example best illustrates this.  When I first bought into HLG at $2.70 in August 2016, ironically enough I only ever invested for income.  They had built a very, very long and stable track record of paying excellent dividend returns and as you can see from the 2016 annual report here file:///C:/Users/user/Downloads/3367_HG_Annual_Report_2016_FINAL_WEB.pdf , see page 3 were paying 30 cps in dividends, fully imputed, worth 30 / 0.72 = 41.7 cps gross.  41.7 / 270 = 15.4% gross return.
I'd be happy as a pig in mud collecting those dividends forever and a day, and I figured with their very long history I could rely on them.  Little did I realise that James Glasson was about to start driving growth with Glassons Au and sales there have grown from $41.2m in 2016 to $251.5m in FY25, that's a 9 year CAGR of 22.3% !  That's transformed the company from a no growth mainly N.Z. operation to a strongly growing Australasian company which now has more than 53% of its sales with Glasson's Au.

The share price has more than tripled and dividends have grown nicely.  To be honest, I faced a barrage of criticism on the other forum about this strategy.  All sorts of people told me that Zara for one and many others were suggested, in fact a whole host of other overseas retailers would destroy Glassons market share.  Its never happened and their market share in Australia continues to grow very strongly.

At the core of my belief is that the target market, women in the 13-30 year's demographic want to inspect the clothes for themselves, feel the fabric and check the fit and most importantly of all, try the garments on so they can be sure they look their best.  For many, the ethical ESG approach Glassons take is also important.  Aside from that is the joy of going out shopping and shopping in a friendly, modern welcoming environment.  The times I have gone into Glassons stores to buy gift vouchers for my kids and now grandkids, I have been very impressed with the stores and how friendly and welcoming the store manager has made me feel.  The modern stores that are well lit, well laid out, welcoming staff and mid price point are some of their key attributes.  Keep in mind Hallensteins can trace its roots back 149 years https://shareinvestornz.blogspot.com/2010/06/history-of-hallenstein-glasson-holdings.html#:~:text=His%20first%20store%20opened%20in%20the%20Octagon%20in,and%20in%20Wellington%20and%20Oamaru%20the%20year%20after. and Glassons started in 1918, 107 years ago.  Imagine all the challenges both brands have withstood over the years.

[winner (n)]

Updating my HLG stuff I did this

Prob tells a story ...methinks about the future than the past

 You cannot view this attachment.

[Dolcile]

Thanks Winner.  The question is, why is Briscoes almost valued twice as much ?

[winner (n)]

One thing I admire HLG for is their clean set of accounts and reporting. No normalisation crap, just straight forward reporting.

KPI performance metrics are very consistent over the years

Gross Margin % generally about 59%/60% 0f sales ....stock turns world class .....employee costs consistently about 18% of sales and occupancy costs about 9% of sales ... all through good and not so good times.

All comes to Profit Margin of about 9% +/- a bit

To me all signs of good management

Keep on doing that and growing sales the future looks bright

[winner (n)]

You'd notice I rave about HLG world class stock management. KPIs shown below

That management drives gross margin $s and great returns on the capital invested in stock. High margins and high stock turns one of main reasons they got $50m ir so in the bank.

That $9.51 of Gross Margin for every $1 in inventory is incredible ...and see how it's getting higher as they grow,You cannot view this attachment.

[Basil]

WOW, that's impressive.  $58.33m cash in the bank to be precise or just on 98 cents a share with no debt !

I've emailed the CFO for some more colour around the prior period adjustment for tax of $1.869m, see note 6.1.  Will update you guys when I hear back.  That's worth 3.1 cps and as it clearly relates to prior periods that takes diluted EPS to 69.2 cps and trades on a historical PE of 12.9.  5 year EPS CAGR is 8%, (eps was 47 cps in FY20)

If they can do 77 cps in FY27 which looks eminently achievable to me the FY26 PE is just 11.6.  Crickey that is cheap for the very high quality of the company, its management, its systems and the way its been growing. 

What I like the most about HLG if I had to single out one thing, is the very conservative way they go about running the business and growing it. They run a very tight ship for shareholders benefit and never seem to lose sight of their primary objective to serve shareholders interests as first and foremost.   Glassons a 108 year old company and Hallensteins 149 year and its being run like the board and management are determined the business will still be thriving a hundred years from now..