HLG - Hallenstein Glassons Holdings

[Basil]

Yeap, so basically online sales in dollar terms have nearly tripled since pre-pandemic levels.
Thanks for adding your analysis Ferg, so in store sales are up 28% which underscores their carefully measured approach to adding further store footprint.
I really like the way they cautiously expand the business.  I think Tim Glasson having 20% of the shares is a major factor here.  Old school carefully paced expansion with no debt...A lot to like.

I also think with all the incredible challenges with Covid, supply chain issues and major increases in freight costs they did extremely well to maintain sales last year and maintain the gross profit margin at the same time.  Those are no easy feat's last year.

Yes Winner, onward and upward from here !  I have just about talked myself into buying even more 👍

[Ferg]

Impressive indeed.  So that is where growth is being driven.  Given enough time, experience and volume, online sales will come at a lower cost to serve.

In other words:
Supplier -> Dist Centre -> Client

versus
Supplier -> DC - > Store -> Client

[Ferg]

Old school carefully paced expansion with no debt...A lot to like.

This statement cannot be said enough and is the reason I like HLG.  Risk is being managed carefully.

[Basil]

This statement cannot be said enough and is the reason I like HLG.  Risk is being managed carefully.

Very prudent risk management like they are managing their own money which is of course the case with Tim Glasson.
I think the thing I also like a heck of a lot, (seeing as long term patience is not one of my strengths...it is best to simply accept and best honest about one's weakness's I reckon) is that we're being paid exceptionally well while we wait for more growth too.

They've paid an interim divvy of 23 cents before and I think close to that level is where April 2023's divvy probably lands so that's 47 cents in the next 6 months and based on my analysis of the imputation credit account I think the April divvy will be partially imputed so we're looking at around a 10% gross yield.
I find it much easier to be patient waiting for more growth when being paid really handsomely like that.

The vast majority of companies are more than happy to take money off you and hold it back to fund growth...HLG are almost unique in the way they go about things in that they pay you really well and grow nicely at the same time.  I wonder what their eps and annual dividends will be 5 years from now ?  Hmmm

[Ferg]

Let's not all buy at the same time on Monday.....
 

[Waltzing]

And some are happy to do special buy backs that support company and related party shareholders wanting to bump some stock...

Someone posted an analytical report on HLG in sharetrader. The profit and loss reports had the income section as debits and the expenses as credits  -() sign.

 lets not even go into the country's transaction id less bank transaction recording systems nor the complete transaction mess that is exported by the broking platforms.

Lets hope that the back office platform for HLG isnt in the same mess that the rest of the countries bank and accounting solutions are in....

wont be buying many as the Sp 500 looks to be trending down into the low 3's and could even break down  below it...

warming signs are every where...

Just call us more pessimistic than an audit team....

https://edition.cnn.com/videos/business/2022/10/16/china-xi-jinping-party-congress-economy-wang-pkg-intl-hnk-vpx.cnn

[Fiordland Moose]

Online shopping % is a great metric and net value add. But I don't think its a free lunch.

I've always considered the level of online shopping to be an important contributor to demand....getting more people to order than they would have otherwise, whether that be people who wanted to shop in private the first time, or prompting existing customers to re-order in higher frequencies than they would have otherwise. In that respect, for me, it's all about broadening demand and widdening the distribution channel.

From a % margin perspective its not a free lunch, and if anything dampens the % margin overall result. From an opex perspective most retailers either fullfil orders from their stores or a dedicated distribution centre to facilitate online shopping. If its the later, there is an incremental opex required.

But the main thing is what it does to GP margins. There is and will always be pressure to offer free shipping or reduced shipping if spending x dollars. That's a cost.

Second and most importantly are the returns. Returns are a massive business cost. Some companies offer free returns, others ask customers to pay for it, which has other indirect costs. But you would be shocked at the incremental level of processing, double handling, and stock write offs that result from returns. Its very common for garments returned to simply be binned rather than resold if there are any slight defects from the return process.

Overall I reckon online actually decreases both GP% and EBIT % of sales, but because it drives demand more, overall drives higher GP and EBIT dollars.  And that is if the bulk of orders are coming from existing customers - new customers have to be acquired, with high customer acquisition costs (google adwords, insta adwords, etc)

But while I reckon a good long term channel to have and grower to absolute PBT earnings, its no where close to a free lunch.

[Waltzing]

The glasson app...

https://www.glassons.com/app

if your transaction banking system is ancient like in NZ and your laws for doing business reach to the sky your companies are going to be less profitable..

NZ business is on borrowed time...

[Basil]

Hey Basil - as per my previous post first 8 weeks sales increase for F23 is about $30m or $12m profit impact

Seeing they made $26m profit in F22 which included the terrible first 8 weeks of last year with sales being down 19% you would have to think you could almost add the $12m to that - and that's only assuming the rest of the year is flat  All looking good

That's the thing isn't it mate.  It's extremely unlikely the rest of the year will be flat.  Not only are sales 51% more than pre covid but we're cycling FY22, a year in which there were extensive periods of lockdowns of both sides of the Tasman.

FM - Don't think anyone's claiming they're a free lunch but HLG built dedicated distribution centers in Australia and New Zealand for good reasons and online sales volumes nearly tripling in the last 3 years has to bring economies of scale with those overheads.  I'm probably very different to the average consumer but when I buy something online and it tuns out it's not quite right, I never get around to being bothered to return it.  Probably means I have more money than sense lol, or more likely there's more profitable or enjoyable ways to spend my time.

[Basil]

^^^^  Thanks for sharing your insights.

[winner (n)]

They did mention (not that long ago) that some of the online stuff was dispatched ex store

Seeing stores aren't selling any more than before the pandemic I suppose that's one way of keeping them occupied

[BlackPeter]

Great discussion ... just one thing I am wondering given that we seem to put huge emphasis on the first 8 weeks of the financial year:

I remember this early spring as quite warm, but the second part a s rather cold and wet and not really inspiring to buy new stuff ...

Do we need to find a year with similar conditions for comparison? Otherwise we always might compare apples with oranges ...

Not sure, whether above observations mean that this years results are still (and sustainably) better than the years before (people bought more despite they could have kept the winter clothes), or less good (people just had to buy two sets of clothes and have now enough for the year). But maybe, we should not take the Covid lockdowns as only important factor ... there is as well the weather, the helicopter money from the government and many other things.
 

[Waltzing]

the darkhorse here is the KIWI .... its more a dead horse at the moment and all retail in NZ might be stuck on a heavy track...

Rating agencies say they cant see the horses for the track in NZ at the moment... who ever shorted KIWI was on to a Winner...
 

[Basil]

HLG had ~ $30m forward cover at balance date, they generally forward cover known purchase commitments in the months ahead.
Retailers are pushing through price increases, think I read last week the average retailer is expected to increase prices this quarter by 6% after a 5% increase last quarter.

People are simply going to have to get used to paying more and the evidence suggests they are.

[Waltzing]

Could it be that AUS and NZ divert on the economic turn pike and HLG becomes an AUS focused company as outlined by MR B for several years now.
 
dont see NZX going anywhere as the country just doesnt want to privatise its self.

warehousing is surely a big deal and currency hedging right now..

No trade deal with INDIA seems just crazy.  Lets juts hope the kiwis just dont know the kiwi is worth not much. and keep shopping!