HLG - Hallenstein Glassons Holdings

[Basil]

For Bar update

Hallenstein Glassons (HLG) reported a solid FY25 result, with profit before tax (PBT) of NZ$58.4m, +12% ahead of FY24 and at the top end of its guidance range. HLG did an admirable job of defending profitability in its NZ businesses while continuing to grow Glassons Australia. Trading through the first seven weeks of FY26 was also strong, with +13% group sales growth. There was no update on CEO succession, with ex-CEO Chris Kinraid having left the business in early September 2025. We continue to view the risk–reward as attractive, with the business: (1) in a strong cash position (NZ$58m net cash); (2) trading on a one-year forward PE of c.11x; (3) expected to deliver solid earnings growth (12% FY25 to FY28E EPS CAGR); and (4) paying a partially imputed c.7.4% FY26E cash dividend. OUTPERFORM.

What's changed?
Earnings: Revised our FY26 to FY28 EPS estimates by +4%/+4%/+5% respectively
Target price: Increased +3% to NZ$11.10.
Another record FY25 result
HLG reported its second consecutive record PBT result of NZ$58.4m in FY25, which is impressive in light of the challenging operating backdrop, particularly in NZ. Glassons Australia continues to be the primary growth driver, with sales up +15% on the prior year, driving a +16% increase in PBT to NZ$34.2m. Glassons NZ also grew PBT +27% to NZ$19.2m, driven by a +2% increase in sales and c.+120bp of gross margin expansion. This was partially offset by the Hallenstein Brothers business, where PBT fell -36% to NZ$4.8m due to broadly flat sales but -200bp of gross margin contraction versus the prior year.

Positioned for growth in Australia
HLG is well positioned to further its growth aspirations in Australia, with NZ$58m of net cash on its balance sheet and the completion of its purpose-built warehouse in 2H26. Glassons Australia has gone from being broadly breakeven in FY17 to c.57% of group earnings in FY25. We forecast an FY25 to FY28E EBITDA CAGR of c.15%, underpinned by modest store openings (~two per year) and solid sales per store growth CAGR of c.6% as the business continues to take market share.

Strong start to FY26 but lots of trades to make 
Sales grew +13% in the first seven weeks of FY26. HLG cautioned not to treat this as indicative of year-ahead performance, given key Black Friday and Christmas trading periods are still ahead of it. The strong start to the year continues to be driven by Australia, where the consumer has been more robust but also where Glassons Australia has increased its market share by a factor of almost four times over the last decade. A trading update will be provided at HLG's annual shareholder meeting in December 2025

Buying quality; OUTPERFORM
HLG is trading on a one-year forward PE of c.11x, in line with its history but below its apparel retail peers. We continue to view the risk–reward as attractive in light of forecast EPS growth, net cash position, and its strong dividend yield. Brand performance is below.

Glassons Australia—sales up +15.3% on the year prior to NZ$252m. Gross margin down -5bp to 61.5%. PBT of NZ$34.2m, up +16% on the prior year. Two new stores opened in the year (Sunshine Coast, Harbour Town Adelaide). HLG is currently working on a new purpose-built warehouse expected to be ready in 2H26.
Glassons NZ—sales up +1.7% on the year prior to NZ$112m. Gross margin up +120bp to 56.5%. PBT of NZ$19.2m, up +27% on the prior year. Two new stores in FY26 (Manawa Bay and Frankton, Queenstown), and the Timaru store closed in August 2024.

Hallenstein Brothers—sales flat on the year prior at NZ$107m. Gross margin down -200bp to 57.2%. PBT of NZ$4.8m, down -36% on the prior year. One new store at Manawa Bay, plus a new concept design store rolled out in Silverdale, Auckland.

Earnings changes
We increase our FY26 to FY28 EPS estimates by +4%/+4%/+5% respectively. This is largely driven by upgrades to our Glassons NZ estimates at both the sales and gross margin line. Our PBT estimates increase +8%/+8%/+9%, slightly higher than our NPAT estimates, with a higher effective tax assumption being the key difference. We estimate FY26 capex of NZ$24m, including the estimated NZ$5m warehouse costs for Glassons Australia.

                2025    2026    2027    2028
EPS* (NZc)   66.2   78.2   86.3   92.4
DPS (NZc)   55.0   66.5   73.5   78.5

Gosh, it occurs to me Forbar are forecasting 18% EPS growth in FY26.  That's deeply impressive.  Their fair value call of $11.10 looks very conservative to me.  Highest analyst target is $11.50.

[Dolcile]

I just wouldn't pay $10 per share on a clothing retailer no matter how good the back of an envelope calculations are. As for $15 per share...really?

I'm curious what the face value of the share has got to do with whether HLG is a good buy? Presumably you know the market cap is what really matters. 

[LoungeLizard]

I'm curious what the face value of the share has got to do with whether HLG is a good buy? Presumably you know the market cap is what really matters. 

No, I didn't know that. Briscoe's - a similarly well-run retail business - has twice the market cap of HLG and its SP is 40% less.

The SP is a curious mix of where a business is now , where it could be in the future and the markets perception of those two things. Right now there's a bandwagon feel to HLG and because of the low volume it doesn't take too many trades to move the dial quite radically (in both directions). That's part of the reason - the market has got carried away - why instinctively, HLG doesn't feel right at these levels.  The macroeconomic backdrop is another - my feeing is that the US is building up to a big correction. I'm a cautious investor by nature - capital preservation is key. I'm sitting out of the NZ market for a while, apart from a few long term, defensive stocks. Those stocks can ride the waves better than companies like HLG, if the weather turns foul.

But I could be wrong, as can anyone. I will be the first to congratulate holders if/when HLG hit $15. And the first to commiserate if/when it hits $7.

[Basil]

Good case study for why HLG should do a 5 for 1 share split. In some retail investors minds, HLG would be much better value at $2 and trading volumes would quintuple.

[lorraina]

Retail.
............Share price.........PE........Yield
BGP.......$5.40..............21,21......3.70%
HLG.......$9.85..............14.89.......5.18%
LOV.......$36.24.............46.39......2.12%
MHJ......40 cents...........41.67........nil
UNI.......$8.86................29.14......4.35%
And rightly at the bottom.
WHS........80.5 cents......[-100.63]  ...nil 

HLG still looks good to me.

[LoungeLizard]

Retail.
............Share price.........PE........Yield
BGP.......$5.40..............21,21......3.70%
HLG.......$9.85..............14.89.......5.18%
LOV.......$36.24.............46.39......2.12%
MHJ......40 cents...........41.67........nil
UNI.......$8.86................29.14......4.35%
And rightly at the bottom.
WHS........80.5 cents......[-100.63]  ...nil 

HLG still looks good to me.

To be fair, HlG's yield is a little higher than that but regardless, there's quite a few defensive infrastructure stocks - GNE, SPK - that offer a greater yield and greater security of capital (particularly now that Spark are in recovery mode).
Diversity is key in these times - having some exposure to retail is fine - but in no way would I make HLG my number one stock.

[Basil]

7.7%,  8.7% and 9.5% gross yields according to Forbar and my assumption of 50% imputation level for the next 3 years. Additionally you get 30 5 cps final divvy for FY25 on 12 December.

[LoungeLizard]

7.7%,  8.7% and 9.5% gross yields according to Forbar and my assumption of 50% imputation level for the next 3 years. Additionally you get 30 5 cps final divvy for FY25 on 12 December.

The SP may get a push from dividend chasers, but after that I'd stay close to the exit if I was you, Basil.
And surely we all know by now that analysts predictions are no better than Mystic Meg's?

[Basil]

I was my own analyst on this for many, many years, long before there was any analyst coverage.

I have my own way of valuing stocks and this screens as deep value up to a spot price today at $13.50.

HLG has built an unrivalled flawless history of high dividend payments for more than 20 years.

James Glasson has done a fabulous job growing Glassons Au in the last 8 years and I have the upmost confidence he will continue doing a superb job in the years ahead as well as providing valuable mentoring to N.Z management

I want to hold superbly managed high quality companies that pay me a high and growing income in my retirement years and am very content to hold HLG long term. Same for Turners.

[LoungeLizard]

We all have our own process of evaluating the intrinsic worth of a business. Not all those process's come up with the same result. That's the game. No one is right all of the time.
Quoting analysts predictions when they suit and rubbishing them when they don't, seems to be common. Best to ignore them entirely.

[Umpah]

My take for what it's worth is that they are very dependent on their success on one man and accidents can happen and it is for that reason that we diversify our investments
I think you have been very astute in your HLG investment thus far but there comes a time to take a conservative stance and reduce your risk

[Basil]

Key man risk is something all astute investors take into account. James Glasson looks to me to be in very good health. His father Tim still serves on the board and has a huge vested interest in ensuring the company performs well with his 18% stake.

The only thing I worry about with HLG is the chance of a takeover. Sure there's the sugar rush of a huge one off gain but I would much prefer the dividends and growth in them and the growth in the share price over the long run. HLG was $2.70 nine years ago. I think it could more than triple again over the next decade.

When TA and FA both say BUY and the FA is compelling that's when the really serious money is made for those that are brave enough to invest a decent sized portfolio allocation.

[winner (n)]

Key man risk is something all astute investors take into account. James Glasson looks to me to be in very good health. His father Tim still serves on the board and has a huge vested interest in ensuring the company performs well with his 18% stake.

The only thing I worry about with HLG is the chance of a takeover. Sure there's the sugar rush of a huge one off gain but I would much prefer the dividends and growth in them and the growth in the share price over the long run. HLG was $2.70 nine years ago. I think it could more than triple again over the next decade.

When TA and FA both say BUY and the FA is compelling that's when the really serious money is for those that are brave enough to invest a decent sized portfolio allocation.

And Chair Warren Bell is a great asset. Been Chair for yonks and continues to give the company  leadership, foresight and stability that many companies lack.

Shame on NZSA on sayin* he's too long in the tooth and wanted him removed last year.

Warren a key component of the HLG DNA

[Basil]

I couldn't agree more Winner. Pretty silly box ticking exercise and counterproductive position taken by the NZSA at the last last AGM and I told Oliver Mauder as much in no uncertain terms.  Warren and the other highly experienced directors on the board like Tim Glasson are part of the secret sauce that makes this company really special and perform so extraordinary well.  I'm hoping to get the time to travel down for the AGM this year.   

[Bev]

We all have our own process of evaluating the intrinsic worth of a business. Not all those process's come up with the same result. That's the game. No one is right all of the time.
Quoting analysts predictions when they suit and rubbishing them when they don't, seems to be common. Best to ignore them entirely.

I like this company, and I have a small investment in HLG.  I kept it small as in an economic downturn cars and electricity are essential while new clothes may not be.