HLG - Hallenstein Glassons Holdings

[Fiordland Moose]

FM - chart with NZ data

Much the same except last couple of years not as volatile as OZ

NZ long term CAGR 3.3% pa ... what is it on your OZ data ... seems a bit less?

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okay winner - I slaughtered a few trees that had started to block part of my view - and fired up the trusty old excel rig.

Australian seasonally adjusted apparel volumes CAGRs:
* Pre Covid CAGR(March 2000 to December 2019): 4.0%
* All period CAGR (March 2000 to September 2022): 5.3%
* Post Covid CAGR: (December 2019 to September 2022: 10.7% [ NB - used Dec 2019 as the unadulterated start as if I used March 2020 CAGR would be even higher]

So the post covid CAGR has been 2.7x that experienced in the 19 full years preceding covid. Curious.

That's not population either...Aussie's pre covid population grew at a 1.5% CAGR...in the same post covid period, population only grew 0.7%.

I mentioned a few posts ago about volumes per capita. The september 2022 volumes per capita are actually up 24.1% relative to where they would be if the pre covid trendline had continued (relative to only 21% above trend on just a total volume basis).

Fortunately immigration is turning on again at a brisker pace than in NZ, but has a long way to go to catch up to historical growth let alone make up for the delta to trend.

I'd suspect current financial year will be a good to strong one for the majority of Australian retailers when compared to the previous year, but given these observations, I think its fair to wonder if FY23 will be to Aussie retailers as FY21 was to the Warehouse.

Obviously some businesses are better than others, have better growth plans, brands, etc, and all that matters for sure.  But I read often in various threads about tides and boats so if its relevant there it may as well be relevant here.

[Waltzing]

Business statistics is such a big subject that one almost fears to use without a team of PHD's.

You just dont know what variable one might miss....

Glad some people have the confidence to do the maths and have confidence in it...

JB HI results were interesting early this week.

The US and EURO market so far have gone on where..

 

[Basil]

All period CAGR (March 2000 to September 2022): 5.3%

Interesting statistic for Australian apparel spending.  I don't share your pessimism about FY24 prospects.
At the annual meeting the directors said that FY22 was the most challenging year they'd ever had in business.  That's really saying something considering this is N.Z's oldest listed company.  Despite that they maintained sales and earned 42 cps.  My thesis as previously stated is this is the new chart datum and represents trough year earnings and HLG trade on just 12.7 times those. 

In terms of tidal flows I believe the tide has already gone out, (S&P 500 retail index was down 35% last time I checked) and the market is already factoring in a significant slowdown in CY2023.  There's a very good chance the central banks will be cutting rates in 2024.  What I am interested in and found useful from your post is the above statistic which is an impressive long term compound average growth rate for Australian apparel sales.

Overlay that with Glassons Au market share gains and proven ability to capture more, combined with the fact that they have such a low retail footprint penetration there so far, (same number of stores as Glassons N.Z. despite the market being 5-6 times the size), and we can see the outstanding long term growth prospects ahead.  Their CAGR in sales of 26% per annum in the last 5 years, subject to variations from one year to another could continue at a similar rate for another decade or even more! In the long term I think the brand's outstanding future in Australia is currently being completely overlooked by the market.

Sheeting this back to my main investment goal as articulated recently on the ARV thread, I think HLG has outstanding prospects as an income stock that will give a very high yield that's highly likely to grow at, or greater than the inflation rate over time.  Best of breed stocks trading on really compelling metrics are the ones I am comfortable to hold long term.

[Waltzing]

AUSS is the life raft this year as money leaves everywhere for US apparently...

https://www.telegraph.co.uk/business/2023/01/18/world-giving-britain-warns-cbi-chief/

Will money stop flowing here? flat NZX for years to come?

[SuperMario]

Share price seems to be deflating. Could reach the single digit $5s if someone needs/wants to sell a chunk quickly.

[Basil]

Expecting an announcement regarding half year result guidance on or about 17 February and I am confident it will be a record half year profit.

Got thinking about the advantages of a share buy-back this morning seeing as its clear they won't be able to fully impute the record dividend they're capable of paying in April.  Depending on timing of capex this year I estimate HLG will have close to $50m cash in the bank at the half year and no debt, (they were already in a very strong financial position with $35m when they last reported).  A 5% buy-back of 59.6m shares = 2.98m @ say $5.50 average = $16.4m cash cost and could be spread over the next 12 months.  The key with these buy-backs is they're tax efficient!  It's always "up too" a maximum of 5% of shares, (NZX regulations), so they don't have to execute fully on any plan they might announce in due course.

Such an action would boost all future year's earnings per share by 5% and anyone who wanted their share of the buy-back cash could sell 5% of their stake and suffer no loss in the earnings or dividends in the years ahead.

I think this is a good time to execute on this strategy.  The company's shares are trading at an extraordinarily low multiple of current year's earnings and their financial position has never been stronger. Paying out a huge interim dividend which the company in my view is highly likely to be capable of doing and attracting a substantial tax impost again through only partial imputation seems like such a waste of money.    I might communicate a few thoughts along the lines above in due course to the company, (will wait for half year profit guidance first). 

One thing we can be 100% confident in, whatever strategy they decide upon going forward, we can rely on Tim Glassons 20% stake and his incredible depth of experience to be sure it's the right one for the current economic conditions.

[Waltzing]

well they have never done a Buy back and they have bit of a bad wrap on NZX... as opposed to the whopping increase in share values on the NYSE and
if they want to keep increasing their foot print in AUS will they want to keep the booty for a rain'e day?

certainly something wasnt expecting from them but there is always a first time....

with the limited number of share on sale at any one time it could keep the chart from it usual cyclical gyration..

[Basil]

As N.Z's oldest listed company they certainly have an incredibly long history, (Hallensteins been trading 150 years this year and Glassons 97 years), so their first priority is the ongoing longevity of the company and then secondly, expansion of Glassons Australia which they continue with in a prudent and disciplined way.

I think while there is certainly plenty of scope and financial headroom for a buy-back as well, the board will keep doing what they have always done and keep more than adequate reserves to continue their steady expansion strategy and ensure they have substantial reserves to withstand any potential slowdown ahead.

Nevertheless, in the circumstances I think it's something they possibly might consider and something worth bringing to their attention.  They don't have to execute on the whole 5%...maybe just mop up those keen to sell in the low $5 range?

[winner (n)]

Aussie guru analyst says he prefers retailers who sell stuff to the affluent or sell stuff to the young and carefree who wouldn't know interest rates and recessions are.

I think he's right on the ball

PS  - actual words were " The UBS team says it prefers exposure to companies that have more affluent customers and those that target very young and older consumers, who are less likely to be feeling the pinch of rising interest rates." And mentioned Lovisa and moose's favourite Universal Store

[Waltzing]

HL Glassons  sells to the young my designer in AUS says.....

low prob on a buy back... as NZ sales might put the wind up them going forward...

its a nail bitter ...17th

[LoungeLizard]

Someone's been listening to you Basil - up 24c on lowish volumes. Bodes well for a real kick when results come out?

[winner (n)]

Someone's been listening to you Basil - up 24c on lowish volumes. Bodes well for a real kick when results come out?

From other channel seems a fair bit of buying support before half year result

Bodes well

[winner (n)]

Media report

There is speculation that Hallenstein Glasson, and even Briscoe, may enter the NZX top 50 following the latest review over the next 15 trading days and index rebalancing.

[Waltzing]

LVMH just posted record something or other had a low in the 540's back in july and now powering up

https://www.france24.com/en/live-news/20230126-french-luxury-group-lvmh-posts-record-sales-net-profit-for-2022

parfait !

 french for we dont give a damn about your recession... everything is perfect...

[Waltzing]

"Media report

There is speculation that Hallenstein Glasson, and even Briscoe, may enter the NZX top 50 following the latest review over the next 15 trading days and index rebalancing."

there is the computation competition isnt there and how close are these 2 to that magic formula....

eve posting this is fraught with the sound of  whipping wramping up the histeria that might follow such an epic event...