HLG - Hallenstein Glassons Holdings

[winner (n)]

I estimate that NZ sales grew by 20% over pcp

Growth in line with overall retail spend on apparel (Stats NZ). NZ sales have for years essentially tracked the market, Nothing exciting about them in NZ

But about +20% in last six months pretty good .... and recession didn't really hit retail spend in that quarter

[winner (n)]

H123 NPBT at $29.5m was $12.6m more than same period last year

How did they manage it

Selling more stuff contributed $31.1m more profit
But lower gross margin % reduced this by $3.7m
Resulting in Gross Margin being up $27.4m
and Expenses were up $14.8m

Breakdown by segment below.

Hallensteins had the biggest drop in GM% (57.9% to 54.3%) while Glassons AU had the biggest increase in expenses (up 29%)

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[Perky]

Is selling online more efficient (less costly) than seliing in store for retailer that operates in both channels?
 

Great question. The short answer is for some businesses it will be and for others It won't be.

I don't know Hlg e-commerce systems but I have worked for an Omni channel clothing business doing design, manufacture, wholesale, retail stores and e-commerce.
In our business e-commerce was the best gross margin division.

Big challenge for Omni retailer is accurately and fairly allocating fixed overheads to truly reflect time spent in each channel. In our business accountant worked over all channels. Stock all in one warehouse, warehouse staff picked stock for all channels.

The model could be quite different if your running multi warehouses, fulfilling from store or using 3rd party distribution pick and pack.

If you google compare retail store cost vs eccomerce you can get multiple conflicting answers as eccomerce models can be quite different.

https://www.cnbc.com/2017/04/19/think-running-retail-stores-is-more-expensive-than-selling-online-think-again.html

https://www.pixelfish.com.au/blog/cost-of-an-online-store-vs-a-physical-shop/

https://www.retaildogma.com/brick-and-mortar-retail-vs-online-retail/

[Basil]

Some people think so but there's often a lot of returns with goods sold online.
I think with clothes, its clear most people want to see the item, feel the fabric and make sure its a good fit. 

[Perky]

Yes I would expect Hlg to have a slightly higher than average online return rate as it sells seasonal fashion with a wide variation of product types and fabrications. Compare to say icebreaker or kmd who are more standardised shapes and garments  I run in an asics Trabuco shoe...I know my size...I just buy from cheapest online vendor as I know what I'm getting before it arrives and it will fit. No retail store experience required.
Fashion items I never buy online...always in store purchase

It would be interesting to know what Hlg return rate actually is if anyone knows?

Anyway we're getting off topic. I thought it was a solid result but they are facing same headwinds as other retailers. Cost of doing business going up. Margin pressure but they have a potential gold mine with glassons in Australia..until their designers muck up a season and then it goes bad quickly...that's how fashion brands roll

[Waltzing]

"Hallensteins had the biggest drop in GM% (57.9% to 54.3%) while Glassons AU had the biggest increase in expenses (up 29%)"

you need good people to handle all those people coming in the doors and you have to pay them well when they can go and get another retail job in AUS?

happy staff happy customers...

average staff easy to find, good staff?

[BlackPeter]

Is selling online more efficient (less costly) than seliing in store for retailer that operates in both channels?
 

Great question. Not sure about HLG, but I read that amazon is paying a lot for the online service ... quite high number of returns (product does not appeal or does not fit). Obviously - these costs would be much lower with selling in a store, if the customer can see and try the product before buying it.

[Basil]

Margin pressure but they have a potential gold mine with glassons in Australia..until their designers muck up a season and then it goes bad quickly...that's how fashion brands roll

Looking at that chart Winner posted, it's been an impressive strong and steady rate of increased market penetration for Glassons Aust over the last 6 years. 

[Clearasmud]

Is selling online more efficient (less costly) than seliing in store for retailer that operates in both channels?
 

Flexibility. A dept store like Myer might say that growing online sales reduces the business's dependance on the landlord, allows a reduction in Sq footage of floor space and allows a reduction in the number of stores.
It could also be desirable to have a state of the art (robotic) fulfillment center.

[Waltzing]

The previous comment made has been contested that due to the number of variations that can creep into AI predictions when the prediction variations is set to higher levels.

AI might not be able to replace backend warehouse programming teams ive been told this morning.

It may still be hard hard work streamlining IT back ends for warehousing.

[Basil]

https://www.nzherald.co.nz/business/casual-in-tailored-out-hallenstein-glassons-sales-leap-but-pressures-from-freight-greenback-remain/Q4GV3V4ALZDSDJYDI4M55QH25I/

[Onemootpoint]

One less competitor.

"Administrators have been appointed to online retailer Ezibuy."

https://www.stuff.co.nz/business/300846171/retailer-ezibuy-placed-into-administration

[Waltzing]

with the Cost of Capital increasing to its highest point in decades companies that dont have to go to the market to grow such as HLG are undervalued due to the no debt levels on the BOOKS....

[Basil]

with the Cost of Capital increasing to its highest point in decades companies that dont have to go to the market to grow such as HLG are undervalued due to the no debt levels on the BOOKS....

Well said, fortress balance sheet and growth without ever coming to the market and all the while, paying huge dividends.  Very impressive!  Trades cum a 24 cent dividend and possible inclusion in the NZX50 as early as next month.

[winner (n)]

Re Ezibuy demise / restructure won't have too much impact ( good or bad) on HLG

EziBuy was a hugely successful Palmerston North-based e-tailer, run by two Gillespie brothers. It was sold to Woolworths for $350m in 2013 Woolies sucked all the mojo out of it, in the way of so many big company takeovers, then offloaded it to Alceon / Mosaic for $30m in 2017. Mosaic has done even worse

Mosaic did themselves no favours when right after they bought Ezibuy they spammed Ezibuy's customer base with email ads for all their other brands without permission.

Bit like HLG in some ways ...like country boys can run great businesses ........but when big boys and money men get involved it all turns to custard.