HLG - Hallenstein Glassons Holdings

[Basil]

Only about 10 days to wait until they release their trading update for FY26 which is usually in such a tight range and always falls within that range when the final announcement comes, its almost as good as announcing the profit result itself, (just take the mid point of guidance).

Analysts current thinking is here rating it a BUY with an average price target of $12.40 and they see ongoing strong growth in sales and EPS in the years ahead.  I note that based on current FY27 forecast EPS HLG at $10.20 currently trades on a forward PE of just 11.2
https://www.marketscreener.com/quote/stock/HALLENSTEIN-GLASSON-HOLDI-6495564/

[The Kid]

Wow. stampede of shoppers at opening of new Glasson store in Sydney - be careful out there ladies. ....https://www.nzherald.co.nz/world/glassons-sydney-shoppers-injured-at-store-opening-as-crowd-surges-in-rush-to-be-first/6AP573242VAHXOYZ6BLLRXFN34/

[lorraina]

Group net profit before tax is expected to be within the range of $83.0 million to $84.5 million (prior year $58.4 million), an increase of approximately +43.5%.

[Dolcile]

Wow wow wow

[Ferg]

Holy heck that is impressive.  Say NPAT is $56m* that is EPS of around 94c.  Last year was 66c.

*using $83.5m NPBT less 33% tax

[Basil]

Not sure why you have used a 33% tax rate Ferg.  Anyway, here's my thoughts.  Its fair to say that I am a bit puzzled how the guidance could be so amazingly good.

Gosh, where do I start ? Well I have picked myself up off the floor and am trying to make sense of this.

Frankly I thought Winner's sales estimate of $515m was soundly based. Historically they have averaged 54% of annual sales in the first half and 46% in 2H so based on that historical pattern and $275m for the first half I thought somewhere around where you guessed it made sense but of course with the war and higher costs of living it could have been a bit less. I woke up this morning and nervously thought, gosh, have the analysts got a bit carried away with their consensus of $535m ?

Then on margins I thought, gosh there must be higher freight costs so I started to have a mild panic attack that consensus of $535m gross sales, $72.3m NTBT giving EPS of about 84 CPS (based on an amalgam of Aust tax rate at 30% weighted two thirds to that and one third to N.Z. at 28% = estimated group tax rate of 29.3%) maybe I am setting myself up for disappointment.

So I nervously distracted myself and had my breakfast and then oh my goodness.

Sales in 2H have actually accelerated $563m annual- $275m in first half = $288m second half, surely not ?
Margins have also expanded notwithstanding increased shipping and distribution costs...how on earth have they done this ?
Net Profit up 43.5% against from memory 32% in the first half is frankly, incredible.

Mid point of forecast is $83.75m less estimated group tax rate of 29.3% ($24.5m) = $59.25m, that's EPS of 99.4 CPS which is more than analysts consensus expectations for FY28 !! Its an incredible 18% EPS beat on consensus analyst expectations.

Even more importantly as the most recent information is always the most pertinent, the business clearly has exceptionally strong sales and margin momentum heading into FY27.

How have they done this against a backdrop of heightened geopolitical tension, a cost of living crisis, additional international freight and local distribution costs is frankly something so remarkable I am almost lost for words.

You know, sometimes in your life you get this rare moment of crystal clear clarity and that happened to me a few months ago when I was feeling a bit low about the Middle East situation and its impact on retail. I saw this pretty young woman on a billboard in Auckland city, (sorry I can't even remember what the advertisement was about), but the epiphany that that came to me like a ray of sunshine direct from the heavens above was this, "never underestimate young people's desire to dress well, look cool and fit in with their peer group" Its a fundamental need they have not a want. Whether that epiphany was a divine inspiration or not, (I think it was), I'm very grateful it came to me. Sometimes in your darker days you really need a ray of sunshine.

[Ferg]

I picked up the average tax $$$ as a % of NPBT for the last 2 years.  2025 was 32.4%, 2024 was 33.8%, although I see 2024 was inflated by the removal of depreciation on buildings.....so I could be a touch high.  Maybe 30-31% after correcting for the depreciation deductibility adjustment in 2024.

Reworked:

Say NPAT is $58m* that is EPS of around 97c.  Last year was 66c.

*using $83.5m NPBT less 30.5% tax

[Basil]

Thanks Ferg, I appreciate you clarifying your thinking.  Possibly worth noting that in the half year to 1 February 2026 the effective tax rate was just under 30%, more or less as I expected, 29.65% a blend of N.Z and Au tax rates.

No doubt we'll get to have a good look under the hood at this again in a months time with the full result released but $1.00 EPS would not surprise me.

[entrep]

Full props to @Basil, really nailed this one!!

[Basil]

Thanks Entrep.  I feel like HLG has only just achieved critical mass in Australia and its a very young brand there.  Looking ahead, they only have 40 stores for 27 million people there whereas Glassons has 35 stores here for 5.3m people so there's a massive runway for growth stretching out more than 20 years in Australia.

With additional scale will come more economies of scale and distribution efficiencies and their new roboticized warehouse should be in full swing now which is double the size at 7,000 sqm than their previous three warehouses combined which were 3500 sqm.  That gives a huge clue as to their future growth ambitions.

I think HLG has a very exciting future ahead of it and the shares are only trading on about 10.5 times my estimate of FY27 EPS (approx $1.12).  The fundamentals are cheaper than when I purchased a no growth company ten years ago on a PE of 11 !...but it now has a 10 year EPS CAGR of 15% so the current forward metrics scream "cheep" louder than a whole aviary full of budgies !