Retail Stocks

[Untamed]

I actually agree with you re the Postie stores. I did used to shop there from time to time, many years ago, but these days it feels more like walking into a $2 store than a clothing store. Has always puzzled me why, as Postie and The Warehouse are the only budget clothing stores we have here. No Kmart. I would have thought there was more than enough business for them both, but it would seem not.

Interesting to see that these profit warnings typically seem to come from companies hardly anybody would buy from anyway. When was the last time you went into a Postie Plus - for me it must be more than a decade ago (and only one visit because they opened a new shop, which turned out to be as disappointing as the rest)?

But sure - people have clearly less money to throw away these days.

[KW]

Interesting to see that these profit warnings typically seem to come from companies hardly anybody would buy from anyway. 

PMV is considered the best retailer in Australia.  David Jones is an institution.  LOV is a high flyer.  All have said the same.  Its coming from all corners.  

[KW]

Has always puzzled me why, as Postie and The Warehouse are the only budget clothing stores we have here. No Kmart. I would have thought there was more than enough business for them both, but it would seem not.

There are 29 Kmart stores in NZ.  

[Untamed]

Not sure what your point is.

Kmart, The Warehouse and Postie were all pretty similar when they first opened. Low cost, affordable, everyday clothing. Our local Postie store was always busy back then, but at some point they seemed to have a change of direction in terms of what they were selling. Reduction in clothing and increase in "other stuff" and they have been going downhill ever since.

A bit like Smith City. I have no idea how that company is even still in business. You can walk into their store here and there is a good chance you will be the only customer in the building.

There are 29 Kmart stores in NZ. 

[Basil]

https://www.kmart.co.nz/search/?searchTerm=pet
K Mart have More than 400 items of affordable pet care.
No need to get "fleeced" at your local Animates store

Got to be a few good things in there for my new best friend.
"If you want a friend...get a dog"  Gordon Gekko Wall Street.

[KW]

Not sure what your point is.

you stated that there was no Kmart here.  that is clearly wrong

[KW]

https://www.kmart.co.nz/search/?searchTerm=pet
K Mart have More than 400 items of affordable pet care.
No need to get "fleeced" at your local Animates store

Got to be a few good things in there for my new best friend.
"If you want a friend...get a dog"  Gordon Gekko Wall Street.

Kmart is great for pet stuff.  And kitchen stuff.  And clothes.  Its a shame that it always looks like a tip though and half of the stuff you want to buy is never in stock so you have to go home and order it online.  

[Untamed]

No I didn't. I said there was no KMart "here" as in, where I live.

you stated that there was no Kmart here.  that is clearly wrong

[Ferg]

I said there was no KMart "here" as in, where I live.

Unless one lived at KMart then that would apply to everyone. 

[Untamed]

You know what I meant 

Unless one lived at KMart then that would apply to everyone. 

[Basil]

https://www.marketindex.com.au/news/ubs-downgrades-4-asx-retail-stocks-revises-earnings-profiles-of-others

Gosh, had a look at the share price graph of UNI...has that been taken out the back of the woodshed or what!
Down from more than $6 at the end of January to $2.59 yesterday.

I don't know enough about their history, balance sheet strength, the strength of their brands or frankly anything else but I do question if it was ever worth the lofty PE's it was trading at a while back.

I do recall debating, (think it was with the southern Moose) about whether at the time it was worth twice the PE of HLG that trades in the same sector.  Seems I was right.  UNI has more than halved since earlier this year and HLG up more that 20% since then inclusive of 24 cent April dividend.

So what about the current pricing situation then ?
According to market screener 10 analysts cover it and the average recommendation is BUY.
PE now is 8.  I vaguely recall its a fairly young company and has a fair bit of debt.
Maybe the PE relativity, (HLG approx 10) between this and HLG now more correctly represents the risks and opportunities.
(HLG has no debt and a history going back many decades)

Maybe if UNI is now a counter cyclical BUY so is HLG ?

[KW]

PMV is on a P/E of 13 and a 4.9% div yield.  

This is probably the bit where recessions send stocks down to single digit P/Es 

[Fiordland Moose]

Yes UNI down to sub 8x PE for FY23 and more crucially FY24, relative to consensus estimates. The market is telling us it has no faith in consensus estimates as downgrade cycles manifest themselves over time across a number of broker downgrades. It has about 1.1x net debt to EBITDA post its acquisition of Thrills. A good retailer with sound margins and returns on capital, shifting product into higher margin own brands, and no NZ baggage. Only been listed a few years and previously PE owned. A more aggressive store rollout strategy but less so than say LOV (for a chuckle have a read of LOV's CEOs remuneration agreement per the AR and how closely it is tied to store rollouts). I'm not keen on store rollouts in this environment and reckon savvy retailers will be / ought to be looking at store closures and getting a tight handle on costs in a patchy and inconsistent trading environment. Automation of DC's must be part of the equation given labour rises.

Quite liquid relative to HLG whose SP like the WHS's tends to lag reported dividends and isn't particularly reactive to macro news flow - SP tends to change well after the fact rather than in advance of it. UNI has rerated - HLG has not (and has that to come in my view).

Retailers SP's tend to shoot well below fundamental value when things crater. I expect the news flow to remain negative for a while yet.

Could be opportunities over the next 18 odd months. And a fair amount of value destruction has already occurred for aussie listed stocks.

Moose never debated lofty multiples but the relative value back in June 2022 and went on to nearly double his money in 8 months. I am very comfortable with that investment decision.

[Basil]

Nothing sweeter than a repeater.  I think you might be in again if it gets down close to $2.

I prefer Glassons more cautious debt free approach to growth and the amount of history there with HLG is extraordinary. 59 cps in cash on the balance sheet last time I looked too.  If there is a pullback in HLG I don't expect it to be anything like the back of the woodshed treatment UNI's got.  On a DCF basis a slowdown is sales for a year or so in a high quality stock like HLG makes a pretty modest impact on the valuation. I would relish the opportunity to buy more at ~ $5.

[Fiordland Moose]

I prefer HLG's debt free profile and slower store rollout profile too. I prefer UNI's all Australia focus and don't hold HLG's NZ business in particularly high regard (Glassons AU I def. do hold in high regard).

Glassons AU probably won't ever rollout fast and may have a capped total store potential as a lot of the brand value lies in a sense of scarcity for key product launches. Its one thing I've observed watching the brand. They understand their brand and dont want to dilute it having hundreds of stores, in my view.

UNI, PMV and Accent are all excellent Aussie retailers and UNI probably the best listed comp for Glassons. NZ retail will probably be hit hard given what some of my friends active in the sector tell me and tie up with the datamine info.

NZ listed retailers much less reactive and more lagged than their Aussie peers, but it does catch up and is equally as severe, as the WHS chart tells us. And that's great if one is nimble though if moving a large parcel may need a lot of time.

We have the chart to help guide us but the struggle will be getting confidence on how financials will be impacted as facts evolve. Inflationary pressures in AU could slow in FY25 - FY24 will be hard given record labour price increases, rental inflation, and staggering power bill rises (with labour and utilities rising in July). So one would hope that will fade in FY25, but then one needs to consider what happens to retail spending when unemployment rises a couple percent from unsustainably low levels and that could spill over or most be felt in 12-24 months rather than the next 12 months. Freight prices are down but a lot if not all those gains are increasingly being offset by weak FX and rising promotional activity which is a bummer. These retail cycles dont rectify themselves in half a year or a year in my experience, they take a bit of time, and that causes investors to get a bit skiddish. People forget how hard and out of favour retail was for long periods in 2011-2016).

Anyway those are my musings. opinions only, take em or leave em it. There are a lot of moving pieces so views are necessarily a net gut feel at a moment in time.

I wouldnt mind a repeater of my experience in UNI and its on my list. I'm not sure if FY24 will be the bottom and hence when I take a dabble or if it'll be in FY25 - but I'm aware of the catalysts as I see them and described above, so will be watching those as they evolve, and looking at a chart. That said I've moved on a bit from dabbling in retailers.

Fluid times, for sure.