HLG - Hallenstein Glasson

[nextbigthing]

H & M would be a credible threat. They sell great stuff and being a worldwide company, they'd have pretty good purchasing power. They have a slightly more upmarket impression but for similar prices to HLG.

[Jaa]

Roger you remind me of the investment manager in Peter Lynch's book "One up on Wall Street" always looking at the numbers and a company's historical performance rather than asking the actual shoppers where they want to shop. Read that article I posted, fast fashion retailers are killing off companies just like HLG where they open.

H & M, Uniqlo and Forever 21 already have flagship stores in Australia competing with HLG's 30 Glassons stores. In March, I visited H & M in the old GPO in Melbourne. Stunning location, packed with customers and stylish clothes with shorts from $AUD5. How can you compete with that?

HLG have a bit of time, good management and capital available so maybe they can reinvent themselves or partner with one of the big boys like Barkers did with Top Shop but don't just assume it will happen!

[Beagle]

Next you'll be telling me Jetstar and China Eastern airlines are going to kill off Air N.Z. LOL.

[Biscuit]

stylish clothes with shorts from $AUD5. How can you compete with that?



Apparently one of the reasons Forever21 customers keep going back, is because the clothes only last two or three washes.

http://www.newyorker.com/business/currency/why-students-arent-fighting-forever-21

[Snoopy]

Payout ratio (5yr average): (70.5 +87.0)/ 150.1 = 105% (Not sustainable?)

Average Annual payout (5yr average): 31.5cps

If we consider a yield of 6.5% over today's business cycle being 'fair', then my valuation for HLG is:

31.5/ 0.065 = $4.85



Well my furry beagle friend - You'd struggle to find a more clean and tidy balance sheet than HLG's one. No B.S. intangible assets or goodwill, no debt other than trade creditors, moderate stock level's and excellent stock turn.
You've answered you own question as to why people invest in this stock...for the excellent dividend feed. When my much loved Beagle, now departed sensed a good feed, she was in with all the enthusiasm of a hungry dog with tail wagging and little pot belly filling up...she could smell a good feed from 100 yards off...so what's wrong with your nose mate :) You needn't apply for a job at the airport as a beagle hound out there if you can't see the feeding that goes on here..if you can't smell it, I put fair value in bigger font for you so maybe you can see it :D :D

I can't say my bare HLG valuation is not compelling. But look back a line and you will see the dividends amount to 105% of earnings over the period. If you reduce the payout over five years to $1.50 (the actual earnings) then eps is 30c.

30 / 0.065 = $4.62

Granted that still looks attractive compared to the $3.50 market price. But our dollar is falling harder than expected. And I have observed that HLG tends to sell at 'price points'. So a $20 T shirt will still be a $20 T shirt, independent of what the actual supply cost was. How long before our consumer is reeducated to buy their T shirts for summer at the $25 price point? And how much profit will HLG lose before this happens?

Meanwhile on the Skellerup thread I am predicting very similar returns to what is available buying HLG, by buying SKL at $1.30. However NZ manufacturers should be getting a tailwind from the lower dollar. And the economies of the new factory, due to be completed in Christchurch within twelve months, should add to the tailwinds.

Buffett said you don't have to swing at every pitch. Good luck with your HLG batting Roger. I think you will do well. But I am hoping I will do slightly better swinging on the Skellerup pitch.

SNOOPY

[Beagle]

I can't say my bare HLG valuation is not compelling. But look back a line and you will see the dividends amount to 105% of earnings over the period. If you reduce

I guess if you have a rock solid clean and tidy balance sheet with no debt you can pay out just over 100% of earnings because there's some depreciation in there or they've extracted more efficiencies from improved stock turn and lower inventory level's. Very rare set of financials I've ever reviewed that are cleaner / tidier and more easily understood than this company.

[winner69]

I guess if you have a rock solid clean and tidy balance sheet with no debt you can pay out just over 100% of earnings because there's some depreciation in there or they've extracted more efficiencies from improved stock turn and lower inventory level's. Very rare set of financials I've ever reviewed that are cleaner / tidier and more easily understood than this company.

Operating cash flows generally are way in excess of NPAT

They have paid the dividends and invested in the stores (sometimes upto $10m a year) from cash flows ....no need for a bank loan or anything

[Beagle]

Apparently one of the reasons Forever21 customers keep going back, is because the clothes only last two or three washes.

http://www.newyorker.com/business/currency/why-students-arent-fighting-forever-21

One of the many good things about having a wise old mother that's still alive is even when she's not around I can still readily recall some of her favourite wise sayings, two of which readily spring to mind:-
"you get what you pay for"
"the bitter taste of poor quality lingers long after the thrill of a bargain"
Operating cash flows generally are way in excess of NPAT

They have paid the dividends and invested in the stores (sometimes upto $10m a year) from cash flows ....no need for a bank loan or anything

You're on too it mate.

Snoopy mate. Poor old Skellerup should have had this tailwind and that tailwind for a very long time now and yet their performance over the long run hasn't been that inspiring has it !! Quality of management top notch ?...but because you have a good beagle's nose I will have another look.

[mikeybycrikey]

I can't say my bare HLG valuation is not compelling. But look back a line and you will see the dividends amount to 105% of earnings over the period. If you reduce the payout over five years to $1.50 (the actual earnings) then eps is 30c.

The 105% dividend payout has only come about because their profits took a hit last year, and they reduced the dividend by less than the dip in profit. Payout was greater than profit but that won't be a long term issue, assuming profits are back up this year.

[tim23]

Jaa don't think they need to reinvent at all doing just fine as is!

[Snoopy]

Operating cash flows generally are way in excess of NPAT

They have paid the dividends and invested in the stores (sometimes upto $10m a year) from cash flows ....no need for a bank loan or anything




I guess if you have a rock solid clean and tidy balance sheet with no debt you can pay out just over 100% of earnings because there's some depreciation in there or they've extracted more efficiencies from improved stock turn and lower inventory level's. Very rare set of financials I've ever reviewed that are cleaner / tidier and more easily understood than this company.


The business of paying dividends from cashflows, not profits, seems to have come onto the NZX scene with the emergence of the gentailers as publically listed companies. Sure you can pay profits from cashflows from say, an oil field (Genesis Energy) , if you don't plan to look for more oil in the future. And yes when the real life of an asset greatly exceeds its depreciated life (eg a Mighty River Power hydro dam), you could certainly make a case for paying profits from cashflows there. I don't buy paying profits from cashflows for a company like HLG though.

Yes you can pay out more that you take in as earnings in any particular year. But try stringing that together year after year and eventually you will run out of capital, and your business will have to close. HLG is nowhere near that point. But HLG will need capital to reinvent itself. Cast yourself back to the 1950s and 1960s when many of our hydro dams were built. Shopping malls were an absolute novelty. TV advertising was in its absolute infancy, and there was no internet. Furthermore almost all clothes were made in NZ and 'fashion' was pure luxury. Yet over that time HallensteinGlasson has constantly reinvented itself, and not only survived but thrived. Meanwhile a contemporary hydro dam from the middle of last century has barely evolved, and even the associated electronics and transformers of the day are only just getting replaced.

HLG needs profits to survive going forwards. Who knows where the next step in the evolution of HLG will lead? But it will be profits, not cashflows, that drive them there. There is a limit to improving stock turn and inventory levels.

SNOOPY

[Snoopy]

Ok time to rerun my dividend yield valuation. I am going to stick to the last five years of results, simply becasue the retail scene does seem to be evolving so fast.



YearInterim DividendFinal DividendepsPayout ratio


201412.0cps16.5cps24.2cps118%


201316.0cps17.5cps31.3cps107%


201214.5cps19cps31.0cps108%


201114.0cps17.0cps29.3cps106%


201014.0cps17.0cps34.3cps90%


Total70.5cps87.0cps150.1cps



Payout ratio (5yr average): (70.5 +87.0)/ 150.1 = 105% (Not sustainable?)



OK time for a confession on my table of 'eps' results. I have adjusted them to take out some of the insurance cashflows from Christchurch earthquake payments (FY2011 and FY2012).

In FY2012 the Insurance payments received amounted to $1.532m for 'material damage' and $0.417k for 'business interruption'.

In FY2011 the Insurance payments received amounted to $0.832m for 'material damage', less a stock and fixed asset write down, and $0.417k for 'business interruption'.

HLG has included all of the above insurance payments in their income for the year. However, I don't believe these earthquake events shoudl be modelled as 'normal business' for forecasting purposes. I have allowed the payments for business interruption insurance because this represents income that HLG would surely have had if the earthquakes had not taken place. I have disallowed the material damage payouts.

If I had included material damage, the 'earnings' per share over the earthquake years would have improved as follows:

FY2012: $1.532m / 59.65m = 2.6cps
FY2011: $0.832m / 59.65m = 1.4cps

So the dividend to earnings 'payout ratio' over five years would be slightly better:

(70.5 +87.0)/ (150.1 + 2.6 + 1.4) = 103%

SNOOPY

[winner69]

The business of paying dividends from cashflows, not profits, seems to have come onto the NZX scene with the emergence of the gentailers as publically listed companies. Sure you can pay profits from cashflows from say, an oil field (Genesis Energy) , if you don't plan to look for more oil in the future. And yes when the real life of an asset greatly exceeds its depreciated life (eg a Mighty River Power hydro dam), you could certainly make a case for paying profits from cashflows there. I don't buy paying profits from cashflows for a company like HLG though.

Yes you can pay out more that you take in as earnings in any particular year. But try stringing that together year after year and eventually you will run out of capital, and your business will have to close. HLG is nowhere near that point. But HLG will need capital to reinvent itself. Cast yourself back to the 1950s and 1960s when many of our hydro dams were built. Shopping malls were an absolute novelty. TV advertising was in its absolute infancy, and there was no internet. Furthermore almost all clothes were made in NZ and 'fashion' was pure luxury. Yet over that time HallensteinGlasson has constantly reinvented itself, and not only survived but thrived. Meanwhile a contemporary hydro dam from the middle of last century has barely evolved, and even the associated electronics and transformers of the day are only just getting replaced.

HLG needs profits to survive going forwards. Who knows where the next step in the evolution of HLG will lead? But it will be profits, not cashflows, that drive them there. There is a limit to improving stock turn and inventory levels.

SNOOPY

Most of the time you do some good work but sometimes you are a worry Snoops. All that about logic seems rather convuluted. Not near the computer at the moment so can't show you where your thinking is a bit awry.

Maybe best way is to ask you what drives NPAT or EPS - cash flow eh. Adjust for depreciation, capex and changes in working capital you have free cash flow don't you.

Over the last 10 years revenues have been about $200m plus or minus a bit. I don't think they have any ambition to be much bigger - service the market and customer they know best.

That level of revenues generates enough cash to keep 'reinventing' themselves (on line and that flag ship store in Wellington is pretty smart, maybe just as good as a Top Shop) as well as pay out the dividends they have. Never borrowed or raised capital (a few options excludes) in that time and still has $20m in the bank.

So I see HLG as a low growth at best company but strong consistent cash flows which enables a steady (high yielding?) dividend to be paid. Market probably prices it like a bond and the price rises and falls as market sentiment changes.

It would not surprise me that in 5 years time HLG revenues are still $200m plus or minus 10% and they still paying $20m out in dividends. How do you price that?

[Beagle]

We probably have three OCR reductions baked in this year so by the end of the year people will be getting circa 2.25% on their call account....OR, and yes I know its a different investment, you can put a 1 in front of that 2.25% to make 12.25% :D Not rocket science, simple investing for high yield....oh and if the NZX goes sideways for the rest of this year because its fully priced then those receiving 12.25% will be grinning won't they :D

[winner69]

Snoops, cast your mind back a few years.

You were always comfortable with RBD maintaining a good dividend when profits weren't that flash ....because of strong cash flows. (Even though at times unlike HLG they have borrowed to maintain them)

[noodles]

Maybe some correlation between currency and EBITDA margin. This seems to have broken down in the last couple of years. Brokers are forecasting a 14% margins for this year. I think management will have to be at the top of their game to fight against the currency tide.



Year
NZDUSD
EBITDA Margin
Change in Currency
Change in EBITDA Margin
Notes


2006
0.649732
15.49%





2007
0.736172
17.74%
13.30%
14.53%



2008
0.714949
14.32%
-2.88%
-19.28%



2009
0.635232
11.95%
-11.15%
-16.55%
Recession


2010
0.721623
13.96%
13.60%
16.82%



2011
0.792322
14.00%
9.80%
0.29%



2012
0.810275
15.58%
2.27%
11.29%
Included insurance payout


2013
0.8203
14.79%
1.24%
-5.07%
Management Blamed late start to winter


2014
0.8306
13.06%
1.26%
-11.70%
Management admitted poor product mix


2015
0.740516
14.31%
-10.85%
9.59%
Broker forecasts


2016
0.68

-8.17%

[winner69]

Noodles - a very strong correlation between Gross Margin % and currency (using the rates in your table). Correlation about .85 going back to 2005

Better to use this as the margin to assess impact rather than EBITA I think

Obviously forex does have a strong influence over margins. The correlation suggests that product cost increases are not fully recovered (lack of pricing power?). One might have expected the odd heavy discounting periods might have brought some variability into the results but the compelling story I'd lower NZD leads to lower gross margins.

If x-rate is .68 in 2016 the correlation would suggest a Gross margin of around 52%/53% - which is 6%/7% points less than 2014 actual (we don't have 2015 yet do we?)

so 7% points Gross Margin is $15m - hope management have things under control

Is any of this mitigated in expenses?

my numbers give this scatter chart .... sad picture if history anything to go by

Almost as sad as th rugby - I gave up watching ..... Wellington / Hurricanes still losers (too many mistakes)

[Baa_Baa]

Notwithstanding yields, there is also consideration for capital management. HLG is volatile, arguably cyclical, and perhaps better to be on the sidelines in the downtrends. Right now though it appears an uptrend is in place. For how long who knows. This may require a more active management approach rather that buy, hold and hope.
7457
Monthly price with the 200EMA daily approximation.

[winner69]

And one guru bank economist is saying the usd rate will have a 5 in front before to long

What will that do to margins ...let alone consumer sentiment

[winner69]

Notwithstanding yields, there is also consideration for capital management. HLG is volatile, arguably cyclical, and perhaps better to be on the sidelines in the downtrends. Right now though it appears an uptrend is in place. For how long who knows. This may require a more active management approach rather that buy, hold and hope.
7457
Monthly price with the 200EMA daily approximation.

Nice cycles there BaaBaa

7 year top to top .... Maybe another bottom in 2016??

[winner69]

Noodles - the nzdusd rates in your spreadsheet, where did you get them from?

[noodles]

Noodles - the nzdusd rates in your spreadsheet, where did you get them from?
http://www.nzforex.co.nz/forex-tools/historical-rate-tools/yearly-average-rates

[winner69]

http://www.nzforex.co.nz/forex-tools/historical-rate-tools/yearly-average-rates

Thanks

Wouldn't want to get back to 2001 levels would we

I know of several outfits that had a reliance on imported goods really suffering and losing money from drastically reduced margins.

Comes down to pricing power and many cant recover all the extra costs or maintain margins.

[percy]

Thanks

Wouldn't want to get back to 2001 levels would we

I know of several outfits that had a reliance on imported goods really suffering and losing money from drastically reduced margins.

Comes down to pricing power and many cant recover all the extra costs or maintain margins.

And all the time overheads such as rents,wages,compliance,rates and insurance just keep on increasing.
Be aware that HLG are taking on a possibly very risking related party lease in central ChCh.If I were a shareholder I would not be comfortable with it.

[winner69]

And all the time overheads such as rents,wages,compliance,rates and insurance just keep on increasing.
Be aware that HLG are taking on a possibly very risking related party lease in central ChCh.If I were a shareholder I would not be comfortable with it.

That's going to be a big building eh - quite impressive and will be real flag ship stores for them. About 1000sm is quite a bit of floor space

Good that the likes of Glasson are building these complexes in Chch though

[percy]

That's going to be a big building eh - quite impressive and will be real flag ship stores for them. About 1000sm is quite a bit of floor space

Good that the likes of Glasson are building these complexes in Chch though

Fantastic news for CHCH agreed.
However if I were still a retailer, or a shareholder of a retailer, I would much prefer to be located somewhere where there were customers.
Be a good many years before any central ChCh retailer sees sufficient customers, to make a retail store profitable.There is a lack of parking which is unacceptable ,and still very few businesses in central ChCh.Shoppers have also been well served by suburban malls.
New building standards mean new buildings are costing a great deal more to construct.Landlords need huge rents to make construction viable.Retailers will struggle.Think of KRK trying to stay in business,moving into a lovely new building,and paying three times the rent they used to pay.!!!
ps.I know KRK are giving up the struggle.
Anthony Gough is struggling to get tenants for his bars.Says he is not putting up the rents from the previously huge amounts he charged for worn out old buildings.He will be lucky to attract tenants at half those rents in my opinion.

[winner69]

Fantastic news for CHCH agreed.
However if I were still a retailer, or a shareholder of a retailer, I would much prefer to be located somewhere where there were customers.
Be a good many years before any central ChCh retailer sees sufficient customers, to make a retail store profitable.There is a lack of parking which is unacceptable ,and still very few businesses in central ChCh.Shoppers have also been well served by suburban malls.
New building standards mean new buildings are costing a great deal more to construct.Landlords need huge rents to make construction viable.Retailers will struggle.Think of KRK trying to stay in business,moving into a lovely new building,and paying three times the rent they used to pay.!!!
ps.I know KRK are giving up the struggle.

Shareholders Association not impressed with HLG disclosures around this and their 'lack of transparency'

Roger, even mentioned the words 'poor governance'

[percy]

Shareholders Association not impressed with HLG disclosures around this and their 'lack of transparency'

Roger, even mentioned the words 'poor governance'

NZSA are correct in my opinion to be concerned.

[Xerof]

Assuming HLG have some sort of forward hedging matrix for imported stock, they'll have it all over the foreign based on-line retailers currently, as the NZD price effect changes with every update of the spot price. Our young 'uns might even venture into a store!

[winner69]

baabaa - I liked the cycles on your chart, very cyclical weren't they

On a very long term chart one could say that HLG is still in a uptrend

Also forming a wedge - I reckon in 2022 the share price will have a go at breaking through $5.50 again

Well get there, eventually. Just pick up the divies along the way

[Beagle]

Yes I hear you guys on the currency...but the currency won't always be down. Feels like I'm getting a bit of payback treatment from my mates in this thread, (probably had it coming and besides I always enjoy a good robust debate). There's risk in any business, bad loans for HNZ, oversupply of wholesale power for the gentailiers, China Eastern and Jepcrap for AIR, PSA for Kiwifruit, disease, famine, drought, pestulance for any agri stock, direct fuel imports for NZR, market fully priced, Greece e.t.c. e.t.c. I tell ya its enough to drive you to cash :)

Very few companies on the NZX have truly exceptional first class management, HLG BRG AIR RYM are four that readily spring to mind.

[percy]

Yes I hear you guys on the currency...but the currency won't always be down. Feels like I'm getting a bit of payback treatment from my mates in this thread, (probably had it coming and besides I always enjoy a good robust debate). There's risk in any business, bad loans for HNZ, oversupply of wholesale power for the gentailiers, China Eastern and Jepcrap for AIR, PSA for Kiwifruit, disease, famine, drought, pestulance for any agri stock, direct fuel imports for NZR, market fully priced, Greece e.t.c. e.t.c. I tell ya its enough to drive you to cash :)

Very few companies on the NZX have truly exceptional first class management, HLG BRG AIR RYM are four that readily spring to mind.

CASH.?????
ie CASH in the bank.?????
Always better to own a bank, than have cash in the bank.!

[Beagle]

CASH.?????
ie CASH in the bank.?????
Always better to own a bank, than have cash in the bank.!

Not always mate. My cash in the bank after selling HNZ at $1.32 has done 10% better than if I hadn't sold.

[percy]

Not always mate. My cash in the bank after selling HNZ at $1.32 has done 10% better than if I hadn't sold.

About to change.
Looks as though the "Nervous Nellies" have gone.
Remember in a correction shares go from weak hands into strong hands.

[RTM]

I just can't get myself over the line with respect to retail stocks. Or for that matter, LPT's with large exposure to retail. Rightly or wrongly, I think there is more disruption coming in the sector from internet shopping. Just bought a scanpan over the internet. Top price. Got some Shimano gear changers from Taiwan for my old mountain bike. Exactly the same as the previous one. Couldn't seem to get them in NZ. And even with the dollar moving, prices seem OK. I guess ultimately most of what we sell is imported, so once any currency protection is consumed its a level playing field again with respect to FX. I also worry that retail often hinges on key people. Warehouse did well when ST was at the helm, lost their way since. Rod Duke (Briscoes) is obviously a star...he's now in his early 60's I think. What happens to his group of companies when he decides to retire ? Will he be spread to thin with the Kathmandu deal ? How will the Aussie piece of this go ? Will the Michael Hill model survive Michael Hill ? Typically has not been a success when NZ Retail Companies dabble in Australia.

[winner69]

About to change.
Looks as though the "Nervous Nellies" have gone.
Remember in a correction shares go from weak hands into strong hands.

Percy, I reckon it be back to $1.35 be month end. It's on a roll

Then roger might think owning a bank is better than putting money in the bank won't he

Mind you $1.35 isn't that more than the DRP ones a while ago.

[Beagle]

Best place for debate on HNZ is....., yep you guessed it, the HNZ thread.
Before anyone gets worried for me, HLG is 4% of my portfolio value. I'm at well over 50% cash which is a good place to be with the current Greek issues.
Happy holder.

[James108]

Is the NZD currently "down" though? When you compare interest rates the US is still a lot lower than NZ. I wonder what the exchange rate would be on equal interest rates and the same expectation going forward.

[TheHunter]

Looks like HLG is having a sale on its SP today.

Roger have you snuck in for a few more sneaky top ups?

Must be due for a market update soon. I suspect the Glassons division shall perform rather nicely.

[Joshuatree]

Well i strode in the an HLG shop today after seeing WINTER SALE signs all over. The main item was racks of SUMMER T-shirts for $10!!!. Looks like an over inventory prob imo like Kathmandhu had with their puffery jackets last year.

[Beagle]

Looks like HLG is having a sale on its SP today.

Roger have you snuck in for a few more sneaky top ups?

Must be due for a market update soon. I suspect the Glassons division shall perform rather nicely.

No. Hoarding cash. Cash is presently KING.

[JohnnyTheHorse]

Looks to have found support at 325... Must time time for another crack at 350 then eh?

[winner69]

Noodles - a very strong correlation between Gross Margin % and currency (using the rates in your table). Correlation about .85 going back to 2005

Better to use this as the margin to assess impact rather than EBITA I think

Obviously forex does have a strong influence over margins. The correlation suggests that product cost increases are not fully recovered (lack of pricing power?). One might have expected the odd heavy discounting periods might have brought some variability into the results but the compelling story I'd lower NZD leads to lower gross margins.

If x-rate is .68 in 2016 the correlation would suggest a Gross margin of around 52%/53% - which is 6%/7% points less than 2014 actual (we don't have 2015 yet do we?)

so 7% points Gross Margin is $15m - hope management have things under control

Is any of this mitigated in expenses?

my numbers give this scatter chart .... sad picture if history anything to go by

Almost as sad as th rugby - I gave up watching ..... Wellington / Hurricanes still losers (too many mistakes)

Some talk of nzdusd at 40 cents. Was there in 2001 so not impossible

Jeez, from that bull**** above HLG gross margin would be 40% at best but they would really have to bump up rices to mitigate the damage. Even 50% gm impacts margin negatively $20m

That $50 sweat will cost punters $80 odd or so next year if the 40 cents happens and HLG try to mitigate the damage ..hmm

Just as well its bull**** eh

[tim23]

Was in store today and the normal 2 business shirt deal for $60 has been tweaked to $69 still a good deal but an interesting move.

[percy]

Was in store today and the normal 2 business shirt deal for $60 has been tweaked to $69 still a good deal but an interesting move.

But wait....there's more.....................
Go online and sign up to receive updates and you get 20% off.
Cancel that order>!
mytuxedo have 3 for $70.
Hang on...
Modern tailor have a special offer.$19.95..
Oh dear.
The 2 for $25 flannel shirts Postie have may be nice and warm,but I may wait until they are 3 for $10.
Then again I might pass on them.!

[winner69]

Was in store today and the normal 2 business shirt deal for $60 has been tweaked to $69 still a good deal but an interesting move.

Good in that they might be preempting real margin pressure and mitigating some of the damage earlier than later

Or they might already be experiencing higher costs

[winner69]

But wait....there's more.....................
Go online and sign up to receive updates and you get 20% off.
Cancel that order>!
mytuxedo have 3 for $70.
Hang on...
Modern tailor have a special offer.$19.95..
Oh dear.
The 2 for $25 flannel shirts Postie have may be nice and warm,but I may wait until they are 3 for $10.
Then again I might pass on them.!

C'mon guys, I thought you were all smart men of the world

Opportunity to smarten up and look the part

GREED IS GOOD - 3 SHIRTS FOR 3 HUNDY

https://www.3wisemen.co.nz/shirts.html

[winner69]

And don't forget the tie at $60 ....cheap as

Christian Dior ties cost heaps more

[percy]

C'mon guys, I thought you were all smart men of the world

Opportunity to smarten up and look the part

GREED IS GOOD - 3 SHIRTS FOR 3 HUNDY

https://www.3wisemen.co.nz/shirts.html

The after work drinks????
Disclosure;I was born miserable and have got worse as I have got older.

[Beagle]

Good in that they might be preempting real margin pressure and mitigating some of the damage earlier than later

Or they might already be experiencing higher costs

Funny you say that Winner as I popped into my local Noel Leeming store late yesterday afternoon to have a look at maybe updating my not so old T.V. to some flasher newer shinier and clearer model before the price goes crazy with the lower Kiwi dollar but I reckon the heavy discounting has already stopped and retailers already know replacement stock will be more expensive so the best deals are already behind us. They seemed disinclined to negotiate much on the fancy 65 inch curved Samsung I liked...have to make do with my old 50 inch...life is harsh LOL.
Gee, 50 inch TV's are a dime a dozen now, well under $1,000 for a decent model but $5,500 for a top of the line Ultra high def Samsung 65...I think I'll make do with moving the Laziboy recliners a little closer :)

[percy]

Funny you say that Winner as I popped into my local Noel Leeming store late yesterday afternoon to have a look at maybe updating my not so old T.V. to some flasher newer shinier and clearer model before the price goes crazy with the lower Kiwi dollar but I reckon the heavy discounting has already stopped and retailers already know replacement stock will be more expensive so the best deals are already behind us. They seemed disinclined to negotiate much on the fancy 65 inch curved Samsung I liked...have to make do with my old 50 inch...life is harsh LOL.
Gee, 50 inch TV's are a dime a dozen now, well under $1,000 for a decent model but $5,500 for a top of the line Ultra high def Samsung 65...I think I'll make do with moving the Laziboy recliners a little closer :)

I am pleased you find something worthwhile to watch. We have SKY.50plus channels of rubbish.

[IAK]

If you've got good broadband go Netflix HD $12.99 per month. No sport though.

[DarkHorse]

I am pleased you find something worthwhile to watch. We have SKY.50plus channels of rubbish.

You mean 57 channels Percy! This old Boss classic's as relevant as ever https://www.youtube.com/watch?v=Pu1AOImIFME
In the blessed name of Elvis let's spend our dosh on some less first world problems!

[percy]

You mean 57 channels Percy! This old Boss classic's as relevant as ever https://www.youtube.com/watch?v=Pu1AOImIFME
In the blessed name of Elvis let's spend our dosh on some less first world problems!

Love The Boss.! I have watched a lot of his concerts.I also enjoy The Who concerts.
Just watched a great DVD;The Imitation Game,starring Benedict Cumberbatch and Keira Knightley.

[winner69]

Love The Boss.! I have watched a lot of his concerts.I also enjoy The Who concerts.
Just watched a great DVD;The Imitation Game,starring Benedict Cumberbatch and Keira Knightley.

The Boss is my hero. A great social commentator

A man close to my heart. Doesn't lie when he describes bankers as "greedy thieves" and "robber barons"

“Jack of All Trades” is a great song, one of his. Listen to the powerful lyrics (and enjoy the musical side as well)
https://m.youtube.com/watch?v=OtGb5MPCMlg

Best verse -

" The banker man grows fatter, the working man grows thin /
It's all happened before and it'll happen again / It'll happen again, they'll bet your life / I'm a Jack of all trades and, darling, we'll be alright"


And metaphorically I agree - "If I had me a gun, I'd find the bastards and shoot 'em on sight" -something has to be done

[percy]

Funny how your post confirms the world never looks good at 3am.!!!
HLG.Have a good history of "doing" good.They used to donate a lot of clothes to The Salvation Army.

[winner69]

Funny how your post confirms the world never looks good at 3am.!!!
HLG.Have a good history of "doing" good.They used to donate a lot of clothes to The Salvation Army.

The golf was exciting. It was good to see the Poms squirming at Lords. Greipel was the strongest again when it comes to bunch finishes in the Tour de France. A really good nights watching.

I made no reference to Hallensteins. Just adding to The Boss conversation who we both seem to appreciate.

Hope Hallensteins still donate to the Sallies (even though some of the Sallies shops might sell more than Hallensteins). Good on them

[percy]

Golf,cricket,and cycling?????????????
I prefer my sweet dreams.....
Maybe a pointer to where they were was I watched "The Imatation Game" last night.
I will however confirm one of the stars of that film,Benedit Cumberbatch,never once appeared in my dream!!
The Sallies do struggle to get "good stuff" to sell,so any "quality" merchandise sold well.
Their shops objective is really to provide low income people with items they can afford,rather than trying to make a profit.
It is offcourse a pity to see rather nice Mercedes parked outside their stores.!

[winner69]

Golf,cricket,and cycling?????????????
I prefer my sweet dreams.....
Maybe a pointer to where they were was I watched "The Imatation Game" last night.
I will however confirm one of the stars of that film,Benedit Cumberbatch,never once appeared in my dream!!
The Sallies do struggle to get "good stuff" to sell,so any "quality" merchandise sold well.
Their shops objective is really to provide low income people with items they can afford,rather than trying to make a profit.
It is offcourse a pity to see rather nice Mercedes parked outside their stores.!

Maybe not so much the Sallies but some of those op shops (the more upmarket ones) could teach some bigger retailers how to 'retail'.

Percy, those in the Mercs are virtuous people saving the world by recycling things.

[DarkHorse]

Ironic that old HLG's thread should prompt the most creative and philosophical musings :)
Enjoyed the Boss link thanks Winner. Don't know if we'll ever "care for each other as Jesus said that we might" as the song goes...the so-called religious right in the US seem oblivious to all his warnings about greed...
Spare a thought for Benedict Percy - who knows when he may find this sight. Keira will be deeply flattered though!!

[winner69]

That BNZ confidence survey I linked the other day had some telling comments from retailers how the falling $ is putting margins under pressure. Some also said they doubted consumers are up to accepting higher prices.

Wonder how HLG are getting on with putting their prices up?

[Hectorplains]

Indeed, add http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11492942 to the list of B & M clothing retailers going mammaries up.

[Regi]

Some also said they doubted consumers are up to accepting higher prices.

HLG is one of the better-managed retailers so I'm sure they will do miles better than the majority, but that's not saying margins won't suffer. I think consumers will HAVE to get used to the idea of paying more across the board. Because what other option do they have? Their dollars aren't going to get them much bargaining power overseas and then whack on all the duties on imports...

[nextbigthing]

The increase in disposable income for many thanks to the lower mortgage rates and hopefully lower milk and oil prices should be a positive for HLG.

[winner69]

July electronic card spend was pretty healthy according toStats NZ yesterday

Boosted by apparel sales

HLG must be doing OK as the smart boys on the block

[see weed]

The increase in disposable income for many thanks to the lower mortgage rates and hopefully lower milk and oil prices should be a positive for HLG.
More disposable income for council rates more like it. Mine went up 19%.

[nextbigthing]

July electronic card spend was pretty healthy according toStats NZ yesterday

Boosted by apparel sales

HLG must be doing OK as the smart boys on the block

Come on Winner, mention they're prob going to go to $4 'or even $4.5 of this keeps up'

[winner69]

Come on Winner, mention they're prob going to go to $4 'or even $4.5 of this keeps up'

I more worried for you guys if margin pressures drive the share price sub $3

[Beagle]

Its been a bloody cold winter too so that's bound to help well run apparel companies like HLG. I can't help wondering what excuse other apparel retailers will contrive this year to blame their poor winter sales :D

[nextbigthing]

Any reason for this to be up 4.3% when there was a sea of red yesterday? Or simply fluctuating on small volume?

[winner69]

Any reason for this to be up 4.3% when there was a sea of red yesterday? Or simply fluctuating on small volume?

Maybe someone started a rumour that they will get back into th NZX50 after being kicked out by PEB last year

Makes you wonder what good changing the index components so regularly really does.

[nextbigthing]

Maybe someone started a rumour that they will get back into th NZX50 after being kicked out by PEB last year

Makes you wonder what good changing the index components so regularly really does.

Creates brokerage

[winner69]

Creates brokerage

And generally makes the index look better as they get rid of the losers

But the again putting XRO and PEB in when they did didnt help the index.

[Beagle]

Any reason for this to be up 4.3% when there was a sea of red yesterday? Or simply fluctuating on small volume?

Small volume. I hold a modest amount as a good solid income stock. The noise that the Govt are making about lowering the threshold for imposing GST on overseas purchases will help a little bit and while much noise has been made surrounding the impact on their margins of the lower currency the fact is we're currently sitting at the 20 year Goldilocks 65 cent level so they've been there before many times and know how to make solid profits at that level.

[TheHunter]

Hit the nail on the head there Roger.

This stock isn't a stock you'd expect to nail a triple bagger on, but a reliable stock that provides an attractive and reliable cash yield for the punter.

Buy in at a good price, enjoy those brilliant divi's and any cap gain is just a bonus.

That's how I view this stock anyway. Short term price fluctuations cause no concern.

[Arbroath]

Its been a bloody cold winter too so that's bound to help well run apparel companies like HLG. I can't help wondering what excuse other apparel retailers will contrive this year to blame their poor winter sales :D

Interesting that this winter HLG management have not felt compelled to provide any updates on sales/forecast profits. In 2014 we got an update in June and an unaudited summary released on 18th August. This year the last info is from the interim in March when things were looking very promising and the cold winter since should have helped them do well this year. I'm expecting a profit in the range of $18.5-19m and will be disappointed if they don't deliver especially given we are being kept in the dark as to performance. What happened to continuos disclosure? If they are tracking +30-40% on last years profit surely an announcement is warranted and if not why not given the perfect conditions for HLG to thrive as indicated at back in March.

[winner69]

Maybe no news is good news but does seem rather strange change in behaviour

Maybe sales been good but margins are down a bit.

FY16 cold be very tough .....from sales growth and. Full year impact of lower NZD

[nextbigthing]

New Zealand spending on electronic cards rose in August for the fourth consecutive month, as spending across all retail sectors increased.

http://www.sharechat.co.nz/article/b33adbe7/nz-spending-on-debit-credit-cards-rises-in-august-as-retail-sales-advance.html

[Regi]

New Zealand spending on electronic cards rose in August for the fourth consecutive month, as spending across all retail sectors increased.

http://www.sharechat.co.nz/article/b33adbe7/nz-spending-on-debit-credit-cards-rises-in-august-as-retail-sales-advance.html

Good news, people spending up before the effects of the exchange rate impact? Not sure, quite surprised especially with all the lobbying for increased consumer importing fees but perhaps the exchange rate is suppressing over seas spending at the moment.

Nice slow and steady gain recently, hopefully it continues its path into the 3.40's.

[boofters]

H&M coming to Auckland, not good news for HLG. I'm afraid these guys are PPL just a couple of year behind. If ZARA gets here too then she's goodnight nurse IMO

[Arbroath]

H&M coming to Auckland, not good news for HLG. I'm afraid these guys are PPL just a couple of year behind. If ZARA gets here too then she's goodnight nurse IMO

Boofters,

I'd have to disagree. PPL are toast, high debt, poor management, staff churn, overpriced offering - the list goes on.
HLG - a debt free retailer with a quality working/middle class offering with management that has a proven track record of adapting in a difficult retail environment. New competitors might make things tougher for Hallensteins but as far as lumping HLG with PPL that is a disgracefully inaccurate comparison imho.

[Beagle]

Most likely only one flagship store in Auckland. Comparing PPL with HLG is like comparing chalk and cheese.

[boofters]

fair enough..but I did qualify this by saying 2 years ..HLG will struggle no question to remain as profitable as it is now. Agreed comparison with PPL is probably unfair - but I still stand by the Brand worth of HLG ( and therefore market cap ) will trend downwards over the next year or 2 or 3.

[RTM]

I'm with you largely Boofters. Matter of time before the internet catches up with HLG. But I've been thinking that for a while and they have continued to do well. Nevertheless, I have no retail stocks and also avoid LPT's that are heavily weighted to malls.

[Jaa]

fair enough..but I did qualify this by saying 2 years ..HLG will struggle no question to remain as profitable as it is now. Agreed comparison with PPL is probably unfair - but I still stand by the Brand worth of HLG ( and therefore market cap ) will trend downwards over the next year or 2 or 3.

I tried to warn them before as well boofters, they prefer to look backwards at history rather than forwards at fashion trends.

H&M's entry was inevitable as is the entry of other global fast fashion chains, Uniqlo, Forever 21, Zara and Mango. One of any of these stores will do as much trade as 10 Glassons stores.

HLG has the resources and experience to change and adapt but it will cost them and if they don't succeed a better comparison will be Postie+.

[nextbigthing]

Matter of time before the internet catches up with HLG. But I've been thinking that for a while and they have continued to do well.

While I see clothing internet sales growing, I don't think it will become the nextbigthing for quite some time at least (and HLG have every opportunity to maintain their position, also on the internet) Why? Buying some generic good like electronics on the net is fine, you know what you're getting. But with clothing, you order a medium and it is more like a small, so you have to return it. The large arrives but it sits funny and looks stupid so you decide to go for a different style altogether. That item then looks like a different colour to the photo, back it goes. My point being for stuff like clothing and shoes it's easier to just pop into the store and get what you need, unless you have a month and time to courier back and forward. Meaning HLG are quite safe IMHO and I hold in my diversified dividend portfolio. I like that clean balance sheet with no debt.

Why on earth anyone would want to buy some of the C*@p they sell, like the super tight chino pants that only go 3/4 way down your leg is beyond me*1, however I'm quite happy to profit from those who desire to dress like they're not quite right upstairs.

*1 sorry to anyone who wears Hallensteins supertight chinos*2


*2 Actually I'm not sorry at all. You look stupid, but thanks for your money.

[percy]

My wife ordered a number of items from Ezi-buy one Friday morning.
The order arrived the next morning,ie Saturday morning.
All items fitted her perfectly,and all were what she wanted.

[janner]

My wife ordered a number of items from Ezi-buy one Friday morning.
The order arrived the next morning,ie Saturday morning.
All items fitted her perfectly,and all were what she wanted.

A woman that is easy to please !!!

You had better hang on to that one Perc ..

[percy]

A woman that is easy to please !!!

You had better hang on to that one Perc ..

You put me in a hard place,a delicate dilemma,between a rock and a hard place.
Best to answer it dishonestly,yes she is easy to please.!!

[janner]

You put me in a hard place,a delicate dilemma,between a rock and a hard place.
Best to answer it dishonestly,yes she is easy to please.!!

Diplomacy at it's best.. :-))))

[Jaa]

While I see clothing internet sales growing, I don't think it will become the nextbigthing for quite some time at least (and HLG have every opportunity to maintain their position, also on the internet) Why? Buying some generic good like electronics on the net is fine, you know what you're getting. But with clothing, you order a medium and it is more like a small, so you have to return it. The large arrives but it sits funny and looks stupid so you decide to go for a different style altogether. That item then looks like a different colour to the photo, back it goes. My point being for stuff like clothing and shoes it's easier to just pop into the store and get what you need, unless you have a month and time to courier back and forward.

Buying clothes online has been a big thing for a long time. I remember 10 years ago there was a craze of people buying and selling second hand clothes on trademe!

It is one reason H&M et al. invests so heavily in their flagship stores. They help build brand presence and credibility for their online channel. No need to build a store in every town like HLG have done.

[nextbigthing]

Buying clothes online has been a big thing for a long time.

Then HLG have dealt with it well (judging by their consistent results).

[nextbigthing]

My wife ordered a number of items from Ezi-buy one Friday morning.
The order arrived the next morning,ie Saturday morning.
All items fitted her perfectly,and all were what she wanted.

Long story short, I purchased some flash shoes online, 3 attempts to get the correct item in good order to me was only sorted by going to a store!
So I guess execution is the key. Hallensteins have been delivering results for years.

Percy I'm glad to hear you wife shops at Ezibuy and not HLG :p

[TheHunter]

While I see clothing internet sales growing, I don't think it will become the nextbigthing for quite some time at least (and HLG have every opportunity to maintain their position, also on the internet) Why? Buying some generic good like electronics on the net is fine, you know what you're getting. But with clothing, you order a medium and it is more like a small, so you have to return it. The large arrives but it sits funny and looks stupid so you decide to go for a different style altogether. That item then looks like a different colour to the photo, back it goes. My point being for stuff like clothing and shoes it's easier to just pop into the store and get what you need, unless you have a month and time to courier back and forward. Meaning HLG are quite safe IMHO and I hold in my diversified dividend portfolio. I like that clean balance sheet with no debt.

Why on earth anyone would want to buy some of the C*@p they sell, like the super tight chino pants that only go 3/4 way down your leg is beyond me*1, however I'm quite happy to profit from those who desire to dress like they're not quite right upstairs.

*1 sorry to anyone who wears Hallensteins supertight chinos*2


*2 Actually I'm not sorry at all. You look stupid, but thanks for your money.

You sound like the type of chap who wears croc's.

All will be revealed tomorrow, I'll have a punt and expect solid performance from Glassons with Hallensteins tracking along nicely and an increased final divi.

[Beagle]

Solid result with profit and sales inline with consensus forecast. Dividend slightly higher than consensus forecast. Outlook comments are concerning. Sales in the 8 weeks since balance date up 4% but at the expense of margin. Intense competition and comments regarding the lower $A and $Kiwi hurting margins and very limited ability to increase prices mean the outlook is clouded.

My read is profit will be lower in FY16. The $Kiwi and $A have fallen substantially and its clear that as the effect of this plays itself out in FY16 and beyond profitability in an intense retail environment will come under pressure.

This is a very well managed company with a very strong balance sheet, excellent stock management and well defined market niche but the currency headwind which is quite strong now and sluggish economy / retail environment means profit growth is extremely difficult and I can see analysts pulling back on forecasts for FY16 and beyond. Awesome dividend yield but I see the pay-out potentially coming under pressure. Note current pay-out of 31 cps slightly exceeds EPS. I think there's some risk to the downside at present for the SP.

http://www.sharechat.co.nz/article/7413ab35/hallenstein-boosts-dividend-8-8-as-fy-profit-jumps-margin-squeeze-seen.html?utm_medium=email&utm_campaign=Hallenstein+boosts+dividend+88+as+FY+ profit+jumps+margin+squeeze+seen&utm_content=Hallenstein+boosts+dividend+88+as+FY+p rofit+jumps+margin+squeeze+seen+CID_729ad0adc249c1 c72ac2aa8fa8303c30&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle7413ab35hallen stein-boosts-dividend-8-8-as-fy-profit-jumps-margin-squeeze-seenhtml

[Joshuatree]

Been buying socks recently , very nice ones too.3 pairs for $10 to go with my $10 Tshirts.Staff keep rearranging the store layout and i see suits for $199 including dress shirt and tie.Often I'm the only one loitering in the shop.Margins look slim alright.

[Beagle]

Its a little surprising that the market hasn't reacted to what is clearly a challenging outlook statement by the company. Analysts still crunching their numbers and investors waiting to be spoon fed what appears to be quite obvious or am I missing something ?

[TheHunter]

I think concerns about this is what drove the SP back down from when it approached $4, so I'd say it was already priced in to some extent.

[James108]

I agree with hunter. No suprises for me on forward outlook.

Do you still hold Roger?

[Arbroath]

I have a model of the last 10 years earnings/margins/cots etc and my FY2016 "guestimate" if the NZD stays around US60-65c, and factoring that costs have been rising from the low 40s to high 40's as a percentage of gross sales the past 6-7 years, is that they should make NPAT of around $15m. If they do that then at $3.45 they are on a PE of 13-14. Hard to see too much upside at the moment but with a 100% pay out ratio and a solid long term track record worth holding IMO - would still yield 10% gross in that scenario next 12 months, and have yielded 12% gross over FY15 so the dividends keep de-risking your investment.

[winner69]

I have a model of the last 10 years earnings/margins/cots etc and my FY2016 "guestimate" if the NZD stays around US60-65c, and factoring that costs have been rising from the low 40s to high 40's as a percentage of gross sales the past 6-7 years, is that they should make NPAT of around $15m. If they do that then at $3.45 they are on a PE of 13-14. Hard to see too much upside at the moment but with a 100% pay out ratio and a solid long term track record worth holding IMO - would still yield 10% gross in that scenario next 12 months, and have yielded 12% gross over FY15 so the dividends keep de-risking your investment.

The key out take from the outlook part of the ill year announcement was The impact of a weaker New Zealand and Australian dollar is beginning to exert margin pressure and the ability to raise prices to compensate is limited.

This along with the 'intense competition' doesn't bode well.

An earlier post (#267) of mine showed the strong correlation between NZD and Gross Margin %. If the NZD/USD stays at 65/70 then margins could be impacted by $10m plus.

Arbroath - I reckon HLG earnings could possibly be as low as $10m this year, if things don't change.

As Percy says do your research and have faith in it and act accordingly. As such I staying out until things a bit clearer. Might even get some at $2.50 odd eh

[Beagle]

I agree with hunter. No suprises for me on forward outlook.

Do you still hold Roger?

See post #345 mate. With the huge move in the currency in recent months there's no point swimming against the tide...better off swimming with the tide, (investing in stocks that benefit from the lower $Kiwi) in a stock like SKL so that's what I'm doing. I might look to re-enter after a correction. I think all the risk to the SP is too the downside at present.

I agree with what my friend Winner69 has said above although I doubt it will head as low as $2.50 but you never know and the company has made in plain for all to see that the headwinds they're facing are quite strong so only time will tell.

[winner69]

Maybe not $2.50 but how about $2.75 then

NZD/USD averaged .76 in last HLG fiscal year .... if it stays at current levels implies ~15% increase in COS. Limited ability to pass on these increases they say. I think you made a good decision Roger

[winner69]

Heck over 370 - pretty amazing really but heck what do I know anyway

Margins must be fine then .... NZD has strengthened a bit anyway

Sales in NZ probably pretty good - economy purring along nicely

[In4a$]

I am gambling that price will build back close to $4 again prior to Dividend date of 25th Nov.
Hope so anyways, brought some at $3.30, will be selling if gets to $4

[Beagle]

Heck over 370 - pretty amazing really but heck what do I know anyway

Margins must be fine then .... NZD has strengthened a bit anyway

Sales in NZ probably pretty good - economy purring along nicely

Amazing really...didn't people read the outlook warning ? Suppose the circa 10% gain off the bottom when we got down to almost 62 cents U.S. gives some relief but we're al long way off last years average FX rate.
Yield hunters appear to be rampant.

[boofters]

Amazing really...didn't people read the outlook warning ? Suppose the circa 10% gain off the bottom when we got down to almost 62 cents U.S. gives some relief but we're al long way off last years average FX rate.
Yield hunters appear to be rampant.


Gotta be some inside knowledge at play here - or if someone can convince me this is a growth stock !! if punters are dealing as an income play then good luck to em'

baffled of balmoral

[TheHunter]

Only light volume sadly...

[banter]

Anyone know if HLG hedged against a fall in the NZD? How much, how long for?

[TheHunter]

"The group is exposed to foreign exchange risk arising from currency exposure predominantly with the US dollar with the purchase of inventory from overseas suppliers.
The Board has established a Treasury Risk Policy to manage the foreign exchange risk. The policy is reviewed on a regular
basis, and management report monthly to the Board to confirm policy is adhered to. All committed foreign currency
requirements are fully hedged, and approximately 23% (2014: 29%) of anticipated foreign currency requirements are hedged on
a rolling twelve month basis.
The Group uses forward exchange contracts with major retail banks only to hedge its foreign exchange risk arising from future
purchases. "

$ amounts are disclosed in the audited F/S, page 16.

[banter]

Thanks. An optimistic reading of that says they're 'covered' for a year - ie currently using an NZD/USD rate of .72 ish.
So the pain is deferred for a year, and the company and customers have a chance to get used to higher prices.

The NZD/USD rate is recovering. I was thinking about selling but might hold off till the next meeting. The SP move could be pointing to some good news.

[bull....]

profit warning

[winner69]

profit warning

For a company renowned for its paucity of information this announcement is weird

Great sales are up 3% but margins are down but you can't read anything into that

And the announcement is flagged PRICE SENSITIVE

yes, bull..... , sounds like and probably is a profit warning ....but how bad?

Maybe they should have just shut up until they can be more 'concise'

[Beagle]

This is the second time they have seriously warned on margins, exchange rate and intense competition...make of that what you will but it would appear many investors ignored the first warning so perhaps the company felt compelled to issue another one ? When you go swimming ask yourself do you want to swim with the tide or against it ?

[winner69]

An earlier post (#267) of mine showed the strong correlation between NZD and Gross Margin %. If the NZD/USD stays at 65/70 then margins could be impacted by $10m plus.

Arbroath - I reckon HLG earnings could possibly be as low as $10m this year, if things don't change.



May as well remind myself of what could happen. I have faith in my analysis.

Wonder what has driven the significant rise in the share price lately?

[Beagle]

It can't be anything other than yield hungry investors who look at HLG's track good record of divvy's and are hoping the company can work their way through the present challenges without materially affecting divvies.
I think they're playing a risky game of potential capital loss first and foremost and lower dividend yields secondly.
Disc: Don't hold and not looking for a cheaper entry. I think the currency stays lower for longer.

[winner69]

Hang in there the bidder at 326 - they will come down to you when they realise how bad that announcement potentially is

Even then after Xmas your 326 might not look like the cleverest buy

[Beagle]

Classic value trap. PE appears cheap and divvy yield very strong. Recent buyers were either hard of hearing or thinking even if it comes back a bit they're still a winner but what if it comes back a LOT ?

[Arbroath]

Roger/Winner,

Have to agree that it is hard to understand why they went to $3.80's recently other than yield chasers who don't do much home work. And clearly FY16 is going to be below FY15 by a margin - the issue is how much. If they don't have a reasonable Xmas/NY then my FY16 guestimate of $15m NPAT (down 15%) will be too optimistic. I'd note that in the past when the currency and margins have been lower they have controlled costs well - the past few years costs have crept up so that for me will be the biggest determinant - can they get costs down to mitigate the obvious margin pressure from the lower currency.
If they don't then you're pick of $10m earnings winner could be close to the mark - nothing is static but I'd also note their worst year the past decade I think was $12.8m NPAT in similar currency conditions with less buoyant sales back about 08 GFC time.

[Beagle]

Massive abyss..(.noun a deep, immeasurable space, gulf, or cavity; vast chasm. .) between buyers and sellers suggests great uncertainty created by the company's own price sensitive announcement. I think the fact that the company tagged the announcement as price sensitive is another clue to the extent of the effect they anticipate on current year profitability. Buyers now appear cautious but weren't the first time the company said it, its really quite bizarre ?

[winner69]

Bidders relented near close - close 340

Lucky sellers?

Tomorrow could be interesting

[forest]

HLG might not be able to match last years profit but I would have thought that for an well established company like HLG and the sector they are in this could be expected.
On the positive side HLG had a cash and cash equivalent of 23.7mil this was more than the total liabilities of 22.8mil at the start of this financial year. Some unfavourable times are likely tougher on HLG competitors which are likely to have more leverage. It might even shake out some competition or reduces new competitors.

[Biscuit]

HLG might not be able to match last years profit but I would have thought that for an well established company like HLG and the sector they are in this could be expected.
On the positive side HLG had a cash and cash equivalent of 23.7mil this was more than the total liabilities of 22.8mil at the start of this financial year. Some favourable times is likely tougher on HLG competitors which are likely to have more leverage. It might even shake out some competition or reduces new competitors.

I agree. I reduced holding a while ago but still hold some. Good company and with any luck the shares will be over sold some time in the future and there will be an opportunity to top up again.

[Beagle]

Yes a good solid well managed company with excellent stock management and a strong balance sheet but nonetheless facing strong headwinds which the company itself is reluctant to at this stage quantify but has warned twice and this time with a price sensitive tag. Profit warning x 2 = cause for genuine concern as far as I'm concerned. Not sure why astute investors didn't get out at $3.80 after the first warning, go figure ? With relentless growth in internet shopping and ever increasing mall rents this has all the hallmarks of a value trap to me. I'm with Winner69 on this one. Profit reduction could get ugly.

[nextbigthing]

Roger re the last sentence, have you been on their website? It's very good, I dont see them getting left behind in that regard, ie they're holding their own with internet shopping. In fact perhaps this will help them keep costs down by moving towards an online distribution system. They may even be able to leverage this move online to negotiate lower mall rents.

[gv1]

Whew sold like a mth ago with mini profit..all malls are dying a slow death! the thing with HLG is they have addressed the issue and have good online system. Lot of people(younger ones) I know order online. Good Co..keeping an eye to come back.

[TheHunter]

The headwinds of FX rates have been priced in for some time IMO... the question is how by much (i.e. could the impacts be bigger than expected) & are holders willing to hold during these times.

[Biscuit]

Lot of people(younger ones) I know order online.

Who buys clothes online? I genuinely do not like clothes shopping but I struggle to see the practicality of buying clothes online?

[Jay]

Slightly off topic, but gv1, if all the malls are dying a slow death, why are both St Lukes and Sylvia Park in Auckland looking to expand substantially , plus the big new one out west Auckland, and big overseas shops are looking to go into these malls. They can't all be getting it wrong!
I will agree that outlets such as HLG will be competing with online sales, however if they can get a good website going they maybe able to survive for awhile yet
I also sold awhile ago thinking that margins are getting squeezed and the dividend may not be able to continued at current rates

[TheHunter]

Who buys clothes online? I genuinely do not like clothes shopping but I struggle to see the practicality of buying clothes online?

Access to more selection / cheaper prices. Search anything on online spending, plenty to back up the massive increase via this medium. While a threat, HLG's online platforms & social media mediums are on par. A good way that isn't capital intensive to reach new markets as well.

[Biscuit]

Access to more selection / cheaper prices. Search anything on online spending, plenty to back up the massive increase via this medium. While a threat, HLG's online platforms & social media mediums are on par. A good way that isn't capital intensive to reach new markets as well.

I think the move now is back the other way: online retailers setting up bricks-and-mortar shops. The best are going to have both strategies and I guess it is easier to move into online than to move into offline

[gv1]

Who buys clothes online? I genuinely do not like clothes shopping but I struggle to see the practicality of buying clothes online?
you will be surprised how many does... Iam four zero you many class me as old. I went to the mall after mths came out with nothing.
i haven't seen people buying anything as well..just browsing.

[winner69]

For what's it worth here are my forecasts for F16 with GM at 55% and GM at 53%

I think all are underestimating the margin impact.

These would give eps of 22 cents or 14 cents - what was last years dividend?

I feel the 13.3 case is still conservative. Sales growth for FY higher than achieved so far and have only included a modest increase in expenses which implies less marketing.

Yes forest et al - great company and decades of financials prove that. But this is not going to be one of their better years

So with market sentiment in mind great company but not a great investment at this particular point in time

[Biscuit]

you will be surprised how many does... Iam four zero you many class me as old. I went to the mall after mths came out with nothing.
i haven't seen people buying anything as well..just browsing.

Forty, you're not old mate - I'm fifty odd, I forget exactly what, and I'm still not old. I bought a coat online once and I do occasionally wear it round the farm where no one can see me.

[gv1]

Forty, you're not old mate - I'm fifty odd, I forget exactly what, and I'm still not old. I bought a coat online once and I do occasionally wear it round the farm where no one can see me.
Cheers
:t_up:

[TheHunter]

Haha I'm early twenties... target market is below my age too.

Visited HLG's store in Welly not too long a go, was very impressed with the vibe & atmosphere they have created in there.

[Beagle]

http://www.odt.co.nz/news/business/364688/hallenstein-glasson-rating-unchanged

Forsyth Barr rate it as underperform

[nextbigthing]

http://www.odt.co.nz/news/business/364688/hallenstein-glasson-rating-unchanged

Forsyth Barr rate it as underperform

And rate PEB as outperform. So sell PEB and buy HLG

[James108]

Bought 2x chinos for $100 yesterday at hallensteins. Just Jeans (next door) had 2x chinos for $110, they were different brands but the hallensteins ones fit better.

Also Glassons was crazy busy, 6 people qued at checkout.

[tim23]

Was in Wellington super store Friday bought work trousers, very busy there too.

[Jinx]

A busy period for HLG, any predictions of the AGM on the 9th? Considering going

[Arbroath]

For what's it worth here are my forecasts for F16 with GM at 55% and GM at 53%

I think all are underestimating the margin impact.

These would give eps of 22 cents or 14 cents - what was last years dividend?

I feel the 13.3 case is still conservative. Sales growth for FY higher than achieved so far and have only included a modest increase in expenses which implies less marketing.

Yes forest et al - great company and decades of financials prove that. But this is not going to be one of their better years

So with market sentiment in mind great company but not a great investment at this particular point in time

Winner,

I broadly agree with your numbers but guess gross margin at 56.5% down 2.8% from this year. Sales $227m, GM 56.5%, expenses flat at $108m, NPAT $15m.
Apart from the GM they achieve over the next few weeks the other key issue is expenses management - expenses have risen from 44%-49% over the past 7-8 years.
In this environment they need very tight expense control and I've assumed they pull it back to 47.8% from this years 48.9%. The last time GM was pressured like it might be this year next 53% in 2009 expenses were 44%.

[winner69]

Winner,

I broadly agree with your numbers but guess gross margin at 56.5% down 2.8% from this year. Sales $227m, GM 56.5%, expenses flat at $108m, NPAT $15m.
Apart from the GM they achieve over the next few weeks the other key issue is expenses management - expenses have risen from 44%-49% over the past 7-8 years.
In this environment they need very tight expense control and I've assumed they pull it back to 47.8% from this years 48.9%. The last time GM was pressured like it might be this year next 53% in 2009 expenses were 44%.

Bear in mind HLG are facing a 'competitive market' as well as 'margin pressure' from higher input costs.

This affects Gross Margin 2 ways

Are HLG reducing prices in this competitive market? Probably are to some extent so one hit to margins.

Higher input costs are going to be the biggest worry. Input costs up 10% or more is a decent chunk out of margins.

Put the two factors together I reckon my 55% is the best it will be for them his year.the 53% I also showed I think is the likely outcome.

Announcements post Xmas will be interesting.

[winner69]

After the recent shocker of an announcement hope the guys and gals from HLG have cheered up a bit and have a good time at the ASM today

Might elaborate a bit on what's happening

[winner69]

They seemed pretty happy and acknowledging how tough it is out there at the moment is a good sign. Emphasis seemed to be on international competition, fierce market conditions and fx impact on margins.

Obviously margins are being impacted. Initiatives like (extract)

• Working closer with our suppliers and negotiating better cost prices. Reduced demand in China has given us the ability to achieve meaningful results with this strategy.
• Reviewing the current supply base and souring from new suppliers where there is a pricing advantage.
• Negotiating freight options and reducing the ratio of air freight to sea freight
• Paying careful attention to our buying. The gap between first margin and achieved margin is probably the biggest single factor we have full control over. Careful attention to timing, quantity, and pricing will bring results.
• Constantly reviewing the product mix and where possible improving the ratio between higher margin and lower margin product.

They say this will only 'soften' ' the impacts. Yes tinkering around the edges as often said.

Arbroath, I still reckon F16 earnings will be closer to $10m than your $15m.

(Cynics note: good they listed all those initiatives above but one would hope that's what they do all the time (good and bad) and not just as a reactionary measure in the tough times)

[winner69]

Percy will love this bit from the CEO speech. He keeps on telling us this.

Rental costs remain the single biggest factor. Over the past 5 years our rent costs as a percentage of total sales have risen by 1 percentage point. That translates to over $2 million before tax. In other words our landlords are taking an increasing share of our profits.


Hope they are getting a 'fair and reasonable' deal from the landlord on the new superstore in Christchurch. Wouldn't want that landlord in particular to take a greater share of profits would we

[Arbroath]

Keep in mind their worst result in the past decade is $12.8m around GFC time. The great thing with HLG is no debt. Might struggle to achieve my $15m guesstimate but the sky needs to fall for them to get squeezed down to $10m IMHO.
re Expenses - companies always sharpen the pencil when GM is under pressure so I'd expect some result in that area.

[winner69]

Keep in mind their worst result in the past decade is $12.8m around GFC time. The great thing with HLG is no debt. Might struggle to achieve my $15m guesstimate but the sky needs to fall for them to get squeezed down to $10m IMHO.
re Expenses - companies always sharpen the pencil when GM is under pressure so I'd expect some result in that area.

That year Gross Margin was 52.8%. Sales were $198m compared to this years $125m/$230m (haven't grown much over the last 7 years have they - less than 2% pa)

But the main factor when making a comparison to that year is that expenses are now more than $20m higher (jeez expenses increased in $ terms about as much as sales have increased)

I sticking with my forecast that at most NPAT will be $13m but likely to be closer to $10m.

One thing though - dividend will be still be pretty high and not unusual for them to pay out heaps more than Free Cash Flow

Good increase today - everybody feeling happy

[winner69]

And Arbroath during F09 (the bad year for them) the HLG share price peaked at 382 and hit 194 at one point

That 382 is a bit spooky eh

[winner69]

The more I look at HLG the more convinced I am that NPAT will closer to $10m than $15m

As Percy quite often reminds us share price follows earnings I see a decent sort of trade coming up some time next year. Chart demonstrates why

An observation - one would have to say that earnings have been trending down over the last few years. This suggests to me that the things they talk about like competition, online choices for consumers and the coming of international competiton have already started to have an adverse impact. And then staying in the game requires new larger stores in (expensive?) localities which doesn't help the cost of doing business. Just a rave

Pretty good dividend though - at the present time about all that's going for it

[Arbroath]

W69,

I like you're chart. Also agree that profitability is slowly deteriorating across cycles as the factors the company management and you mention have an effect. If they deliver $10m I've no doubt the share price would be c. $2.50 or lower sometime next year. In that scenario they'd still pay out 100% of earnings (balance sheet has no gearing) which would be $0.17cps but that would be a poor investment in anyone's eyes (negative total return).

However, I'm just not prepared to be as bearish as you just yet. HLG management have done a great job over the years, and I note electronic spending was out today with strength driven by spending on hospitality and clothes - the Xmas season is crucial as it is every year. If they can deliver $15m in this environment that would be a strong result and see a dividend of c. $0.25 fully imputed which on $3.30 is a gross yield of 10.5%. They need to deliver 9-10% yields given the industry and all its risks.

Lets put a pint on it - they make $13m+ I win, under $13m you win. I'll still be able to fund the beer as HLG is 8% of my rather concentrated portfolio of 9 stocks....

[winner69]

W69,

I like you're chart. Also agree that profitability is slowly deteriorating across cycles as the factors the company management and you mention have an effect. If they deliver $10m I've no doubt the share price would be c. $2.50 or lower sometime next year. In that scenario they'd still pay out 100% of earnings (balance sheet has no gearing) which would be $0.17cps but that would be a poor investment in anyone's eyes (negative total return).

However, I'm just not prepared to be as bearish as you just yet. HLG management have done a great job over the years, and I note electronic spending was out today with strength driven by spending on hospitality and clothes - the Xmas season is crucial as it is every year. If they can deliver $15m in this environment that would be a strong result and see a dividend of c. $0.25 fully imputed which on $3.30 is a gross yield of 10.5%. They need to deliver 9-10% yields given the industry and all its risks.

Lets put a pint on it - they make $13m+ I win, under $13m you win. I'll still be able to fund the beer as HLG is 8% of my rather concentrated portfolio of 9 stocks....

Ok - a pint of the best ale. Remind me when it is time to collect.

In 3 of the last 5 years they have paid out more than what free cash flow was. So probably pay out $18m-$20m this year irrespective of what profit is - so 30 cents is on the cards still.

[winner69]

W69,


...... and I note electronic spending was out today with strength driven by spending on hospitality and clothes - the s....

Clothing and Footwear category for November was 6.3% up on last year

Follows a pretty poor couple of previous months - last 3 months (Sept through November) are only up 1.4% on last year

Maybe, just maybe, NZ shoppers have just woken up and started to buy big for Xmas and the holiday season.

Wonder how things are looking in Australia?

[winner69]

Arbroath mate, stop buying

You pushing price up too much

We will be talking 5 bucks again at this rate

[BIRMANBOY]

Ok W69 you can rest easy ...the cat has decided to upgrade his wardrobe so its undoubtedly on its way back up. LOL I just couldn't resist the Dividend yield and the cash was burning a hole in my pocket.
Arbroath mate, stop buying

You pushing price up too much

We will be talking 5 bucks again at this rate

[Arbroath]

Arbroath mate, stop buying

You pushing price up too much

We will be talking 5 bucks again at this rate

I promise winner its not me. I'm in at $3.33 and have received a couple of dividends and quite happy holding. I love the lack of gearing and quality of management but wouldn't overweight Hallensteins due to the tough sector they operate in. A happy holder though at these levels.

Some people like it though - its put on 7% in a week but I'd say $3.50/60 caps it until definitive news on how the Xmas season has gone for them.

[nextbigthing]

Good sign.

http://www.3news.co.nz/nznews/record-christmas-sales-weekend-for-nz-2015122307#axzz3v5Dvc91m

[winner69]

Expect a positive announcement from HLG in next day or two

All signs point to really strong sales and hopefully they will also say that margins are honky dory as well.

That'll set a rocket under the share price.

[winner69]

Stats NZ Electronic Card Spend for December

Apparel up 7.6% on year prior

HLG probably up more.

Last few months numbers been very soid

HLG update any day know - robust sales + OK margins = share rice $4 plus

[Arbroath]

I can taste that pint winner....

[nextbigthing]

Stats NZ Electronic Card Spend for December

Apparel up 7.6% on year prior

HLG probably up more.

Last few months numbers been very soid

HLG update any day know - robust sales + OK margins = share rice $4 plus

You buying then Winner?

[Not too Flash]

Expect a positive announcement from HLG in next day or two

All signs point to really strong sales and hopefully they will also say that margins are honky dory as well.

That'll set a rocket under the share price.

NO News is not good news at this stage .......

[winner69]

NO News is not good news at this stage .......

Big wigs still on holiday ....be patient

(Some of them led by example and helped out in the stores because HY were so busy)

[Arbroath]

NO News is not good news at this stage .......

No basis for that assumption imho....see below history of post Xmas updates

19/1/15 - strong sales
16/1/14 - weak sales
15/2/13 - strong sales
8/2/12 - strong sales
26/1/11 - weak sales

Hopefully we get an update in the next week or two and all the signs are it "should" be a strong update. WHS doing well, MHI very good in NZ and Australia, eftpos spending strong in apparel sector. If HLG sales are weak then it would be a concern as likely company specific. I'm thinking sales should be firm and H1 profit should be c. $7-8m. In the 25 Nov trading update the CEO said next update "late January"

[winner69]

Expected good news announcement today or tomorrow I think.

Xmas/new year trading must have been very strong.

[mikeybycrikey]

Expected good news announcement today or tomorrow I think.

Xmas/new year trading must have been very strong.

You've been telegraphing this for a while. Have you got sources or is this just an educated guess?

It would be good to get an update on HLG trading since the last update was rather vague and open to interpretation.

[winner69]

You've been telegraphing this for a while. Have you got sources or is this just an educated guess?

It would be good to get an update on HLG trading since the last update was rather vague and open to interpretation.

From somebody who reckons he knows but even then probably an educated guess

Mikey, You reckon they had a good December and half year?

[mikeybycrikey]

From somebody who reckons he knows but even then probably an educated guess

Mikey, You reckon they had a good December and half year?

I'm reasonably confident. I think the price was hit a little too hard by the earlier trading update.

I'm not expecting spectacular trading figures but I'm expecting the market and the SP will be happy with them.

[Yeshiva]

The dividend is historically superb, though more due to P/E compression of late. I don't have any Hallensteins shares but they do seem to be very good retailers. My only worry is that they are forgoing opportunities for growth by paying out so much cash to shareholders.

[Beagle]

FWIW I was in ST Lukes just after new year and Glassons and Hallenstiens stores were incredibly busy. I was very surprised...both stores were really teaming with heaps of people.
Disc - Don't hold, just adding a tiny bit of anecdotal evidence.

[macduffy]

The dividend is historically superb, though more due to P/E compression of late. I don't have any Hallensteins shares but they do seem to be very good retailers. My only worry is that they are forgoing opportunities for growth by paying out so much cash to shareholders.

They tried the growth bit several years ago in Australia with mixed results. Perhaps they've concluded that clothing retailing is a crowded market with only limited opportunities for growth; that it's better to concentrate on improving the current business rather than spending a lot of capital on expansion?

Disc: Don't hold but have often considered buying what has been one of NZ's consistently better retailers.

[Arbroath]

FWIW I was in ST Lukes just after new year and Glassons and Hallenstiens stores were incredibly busy. I was very surprised...both stores were really teaming with heaps of people.
Disc - Don't hold, just adding a tiny bit of anecdotal evidence.

Just a bit more anecdotal also.....in Melbourne Glassons foot traffic seemed moderate but Kathmandu was absolutely dead - went into 2 stores on different days and I was the only one in there apart from staff in major stores .....prob more relevant to KMD thread but all the stuff was overpriced and marked down to still over priced levels - god knows how KMD will be turned around.

Disc - hold HLG at $3.19, no KMD

[winner69]

Month nearly over and WHS and MHI only retailers to tout how good they were over Xmas (verItas don't count)

No news from others suggest it was a bit ho hum for them - not bad but not good?

Might be a late Friday afternoon just before a long weekend for the shakers and movers coming up - hope not

[mikeybycrikey]

Last trading day of January today and still no update from HLG. Monday is going to be later than "late January".

Bad news coming at 5.01 pm, maybe?

[Antipodean]

I made contact through the investor website and have been informed that a NZX release will be made no later than the end of this week.

I am confident of a good announcement, given the general NZ positive indicators of the trading period.

Holding.

[winner69]

I made contact through the investor website and have been informed that a NZX release will be made no later than the end of this week.

I am confident of a good announcement, given the general NZ positive indicators of the trading period.

Holding.

Good one Antipodean

As a matter of interest what do see as an 'acceptable' growth figure.

I would be disappointed if not at least 7% (bare minimum) - other wise my FY forecast shot to pieces

[Beagle]

Other retailers appear to have had a good Christmas season...even the humble WHS and KMD which have been struggling lately, Briscoes too (which is not a surprise) so its quite a curiosity to see such depth on the sell side and the price quite weak. Go figure ? Hope its not a 5.10 p.m. type NZX release if you know what I mean.

[winner69]

I think this is more than disappointing - really disappointing


https://www.nzx.com/files/attachments/229295.pdf

[winner69]

Half year sales up a miserly 1.3%

Gross margin 4% points below the same period last year due to the lower exchange rate and also to competitive influences.

Group net profit after tax down 20%

The dividend of 13 cents will make many happy

[winner69]

News out

Probably has expected in spite of pretty good retail environment

Result probably built into the price as all factors known ...but expectations might have higher (punters too excited?)

Share price could go up today - maybe $3.40 to $3.50

[percy]

Maybe some correlation between currency and EBITDA margin. This seems to have broken down in the last couple of years. Brokers are forecasting a 14% margins for this year. I think management will have to be at the top of their game to fight against the currency tide.



Year
NZDUSD
EBITDA Margin
Change in Currency
Change in EBITDA Margin
Notes


2006
0.649732
15.49%





2007
0.736172
17.74%
13.30%
14.53%



2008
0.714949
14.32%
-2.88%
-19.28%



2009
0.635232
11.95%
-11.15%
-16.55%
Recession


2010
0.721623
13.96%
13.60%
16.82%



2011
0.792322
14.00%
9.80%
0.29%



2012
0.810275
15.58%
2.27%
11.29%
Included insurance payout


2013
0.8203
14.79%
1.24%
-5.07%
Management Blamed late start to winter


2014
0.8306
13.06%
1.26%
-11.70%
Management admitted poor product mix


2015
0.740516
14.31%
-10.85%
9.59%
Broker forecasts


2016
0.68

-8.17%





I guess Noodles is not surprised by today's poor result,having posted the above on 4-7-2015.

[winner69]

I guess Noodles is not surprised by today's poor result,having posted the above on 4-7-2015.

I expanded those numbers to a Gross Margin level in more detail in a subsequent post (#267)

My optimistic forecast or F16 was for a 55% Gross Margin - 4% points less than F15

H1 GM down the 4% points - but full impact of lower $ still to come. I would contend a lot of margin decline to date are these 'competitive pressures'

Will be interesting to see how this pans out over the rest of year

[benjitara]

15-20% overpriced at current $3.20 levels surely. I don't mind the business in terms of yield and cash position but where is their growth going to come from really?

[Beagle]

I think this is more than disappointing - really disappointing
https://www.nzx.com/files/attachments/229295.pdf

You've nailed it. Bottom line is this result must be viewed in the context of how the other retailers have done and Warehouse, Briscoes and Kathmandu all seem to have done a heck of a lot better at managing competition and the currency than HLG. No reason to sugar coat it, this is a very poor period of financial performance. I would expect significant price weakness going forward given that the full effect of the lower currency is still to be felt.

I find it quite interesting that significant price weakness was being exhibited in the stock yesterday, see post #427...insiders in the know trying to get out ?

[sb9]

Hmmm...market clearly disappointed with the trading update it seems.

Disc - non holder.

[winner69]

Hmmm...market clearly disappointed with the trading update it seems.

Disc - non holder.

It won't go much lower

Bargain hunters / Yield people will get it back to $3.00 by days end

[Beagle]

It won't go much lower

Yield people will get it back to $3.00 by days end

Disc - Non holder and not trying to talk it down but I wouldn't be so sure mate. This result guidance beg's the question of how come the other retailers managed things so well, even KMD for goodness sake and yet Mr consistency in the retail game appears to have somewhat dropped the ball. Are mall rent increases some of the problem, is competition in this sector really intensifying or is the inexorable trend toward online retail finally making its presence felt on HLG's bottom line, or perhaps more likely a combination of these and other factors including the exchange rate ? Whichever way you slice and dice this I think this update is quite a shocker.

[James108]

-10% off already low SP over one bad half year?

Will be looking into buying more this weekend.

[boofters]

Disc - Non holder and not trying to talk it down but I wouldn't be so sure mate. This result guidance beg's the question of how come the other retailers managed things so well, even KMD for goodness sake and yet Mr consistency in the retail game appears to have somewhat dropped the ball. Are mall rent increases some of the problem, is competition in this sector really intensifying or is the inexorable trend toward online retail finally making its presence felt on HLG's bottom line, or perhaps more likely a combination of these and other factors including the exchange rate ? Whichever way you slice and dice this I think this update is quite a shocker.

as much as I cant believe I'm about to say this, but KMD brand is far more valuable than HLG -that is the core issue here.

They need to Create or Buy a "Lexus" type clothing brand with that cash mountain to eck out some decent margin - 3 wise men ?? - something because the market HLG is in is swamped with like product IMHO.

[winner69]

Disc - Non holder and not trying to talk it down but I wouldn't be so sure mate. This result guidance beg's the question of how come the other retailers managed things so well, even KMD for goodness sake and yet Mr consistency in the retail game appears to have somewhat dropped the ball. Are mall rent increases some of the problem, is competition in this sector really intensifying or is the inexorable trend toward online retail finally making its presence felt on HLG's bottom line, or perhaps more likely a combination of these and other factors including the exchange rate ? Whichever way you slice and dice this I think this update is quite a shocker.

Bet you are now glad you took heed of what you read on Sharetrader and exited when you did

Close to 4 bucks wasn't it?

Good call

[Beagle]

as much as I cant believe I'm about to say this, but KMD brand is far more valuable than HLG -that is the core issue here.

They need to Create or Buy a "Lexus" type clothing brand with that cash mountain to eck out some decent margin - 3 wise men ?? - something because the market HLG is in is swamped with like product IMHO.

Agreed. The traditional response to increasing cost pressures, (exchange rate), is to source product from cheaper suppliers but that hasn't gone down well at all with PPL customers so I think the HLG directors can rule out that approach.

[Beagle]

Bet you are now glad you took heed of what you read on Sharetrader and exited when you did

Close to 4 bucks wasn't it?

Good call

Yeah IIRC it was mate and I definitly dodged a bullet with this one. Was thinking of taking a small stake again yesterday but something smelled funny with the price drop and volume on offer so it gave a pretty solid reading on my information "leak metre". Best investor tool by miles I reckon is a beagle dog's nose for information leaks, B.S. and corporate spin, (only information leak metre gave a reading, Directors seem like pretty straight shooters to me). I like the company but something's got to change to meet the changing circumstances and I'm not sure what ?

[winner69]

Be interested to see nz/Aus breakdown when interim comes out

In nz if the electronic card spending data can be used as a proxy for market conditions then HLG performing in line with the 'market'.The Clothing and Footwear Category sales were up just 2% over the sae period. So maybe 1.3% isn't that bad ...but not good

Maybe clothing retailing in NZ isn't that buoyant at the moment after all. Everybody spending the extra cash on restaurants and in hardware stores by the look of the numbers

[winner69]

Yeah IIRC it was mate and I definitly dodged a bullet with this one. Was thinking of taking a small stake again yesterday but something smelled funny with the price drop and volume on offer so it gave a pretty solid reading on my information "leak metre". Best investor tool by miles I reckon is a beagle dog's nose for information leaks, B.S. and corporate spin, (only information leak metre gave a reading, Directors seem like pretty straight shooters to me). I like the company but something's got to change to meet the changing circumstances and I'm not sure what ?

The bottom of his cycle will come - later this year or early next year.

Look at my chart in post #400 on this thread to see what I mean

Get a good price sometime - they keep paying divies - and some capital gains until things turn again and its all honky dory.

See the bargain hunters already piling in

[mikeybycrikey]

as much as I cant believe I'm about to say this, but KMD brand is far more valuable than HLG -that is the core issue here.

They need to Create or Buy a "Lexus" type clothing brand with that cash mountain to eck out some decent margin - 3 wise men ?? - something because the market HLG is in is swamped with like product IMHO.

I initially thought this was a good idea but then remembered that they own Storm which is trying to play in that market (for womenswear rather than menswear).

I don't think that have been terribly successful there. Maybe mewswear would work better but with a general trend away from suits and ties in the office environment, I'm not so sure.

At the moment, I'm not sure what to think about HLG. I think there are a reasonably robust brand but the company hasn't really gone anywhere in the past few years.... and is slowly dealing with more and more competition (internet, TopShop, H&M, Zara, etc).

[Beagle]

The bottom of his cycle will come - later this year or early next year.

Look at my chart in post #400 on this thread to see what I mean

Get a good price sometime - they keep paying divies - and some capital gains until things turn again and its all honky dory.

See the bargain hunters already piling in

Fair comment mate. I guess directors are signalling confidence with dropping the dividend by only 1 cent from 14.5 to 13.5 cps, much less than ~ 20% drop in profit. I guess if one is trying to read the tea leaves one could read something into that. Yield is super attractive but is it maintainable...that's the $64,000 question !

[macduffy]

as much as I cant believe I'm about to say this, but KMD brand is far more valuable than HLG -that is the core issue here.

They need to Create or Buy a "Lexus" type clothing brand with that cash mountain to eck out some decent margin - 3 wise men ?? - something because the market HLG is in is swamped with like product IMHO.

Now that would be a radical move away from their knitting for HLG!

For what seems like hundreds of years they've been the go-to place for conservative, value-for-money menswear. Why, even as recently as last year I bought my grandson a smart new shirt from HLG. For some, probably quite valid reason, he hasn't worn it yet.

Seriously though, I don't hold but wouldn't be betting against them coming back strongly.

[winner69]

It won't go much lower

Bargain hunters / Yield people will get it back to $3.00 by days end

See back over $3.00

No need to panic was there

[Beagle]

See back over $3.00

No need to panic was there

You were right oh wise one :cool: Shame somebody tipped some out at the end at $2.95 otherwise you would have looked like a legend.

[winner69]

Bit of sell down at days end and close 295

Maybe the words of Rod Duke spooked a few - he said the next year going to be harder to manage margins than the past one, the adverse impact of a lower $ is just starting to hurt.

[Beagle]

It won't go much lower

Bargain hunters / Yield people will get it back to $3.00 by days end

What do you think mate. SP been beaten down enough now in the low / mid 270's cum a 13.5 cent fully imputed dividend ?
Normally a very well run company...maybe they just slipped a bit this summer with a slightly off product mix crimping margins ?
Time for another ride around the race-course with this one now its so unloved ?
Good management...if anyone can make a go of selling clothes in the middle of the rag trade price point, surely these guys have the best shot at it ?

[TheHunter]

What do you think mate. SP been beaten down enough now in the low / mid 270's cum a 13.5 cent fully imputed dividend ?
Normally a very well run company...maybe they just slipped a bit this summer with a slightly off product mix crimping margins ?
Time for another ride around the race-course with this one now its so unloved ?
Good management...if anyone can make a go of selling clothes in the middle of the rag trade price point, surely these guys have the best shot at it ?

Get back on the horse Roger, surely you can smell some value here

[Beagle]

Yeap back on...giddy-up :D

[winner69]

Yeap back on...giddy-up :D

At least they are a $1 cheaper than the ones you sold not that long ago.

Divie should protect any potential downside but .......

[Beagle]

Yes its nice to be back on the same horse at a much cheaper price. Track conditions a little softer underfoot now but the trainer and jockey have a good reputation and progress should be sound after a slight tweak to the dietary intake and vitamin supplements. Punters will be lining up with all their spare money from cheaper petrol and interest rates. If the far less beautifully bred Kathmandu can make progress in the soggy track conditions my horse will romp home once the weather conditions improve a little.

[brend]

Yes its nice to be back on the same horse at a much cheaper price. Track conditions a little softer underfoot now but the trainer and jockey have a good reputation and progress should be sound after a slight tweak to the dietary intake and vitamin supplements. Punters will be lining up with all their spare money from cheaper petrol and interest rates. If the far less beautifully bred Kathmandu can make progress in the soggy track conditions my horse will romp home once the weather conditions improve a little.

Great Dividend yield but aren't you concerned about flat sales and profit? Clothing retailing is tough business. Kathmandu and pumpkin patch are perfect examples.

[macduffy]

Great Dividend yield but aren't you concerned about flat sales and profit? Clothing retailing is tough business. Kathmandu and pumpkin patch are perfect examples.

Quite so, but Roger's horse is a proven stayer, compared to those young lightweights, with the breeding and experience to handle varying conditions. Tempted to have a few bob on it myself at some stage.

[sb9]

Great Dividend yield but aren't you concerned about flat sales and profit? Clothing retailing is tough business. Kathmandu and pumpkin patch are perfect examples.

Agree with you there, better to avoid retail under current macro economic environment.

[Beagle]

Quite so, but Roger's horse is a proven stayer, compared to those young lightweights, with the breeding and experience to handle varying conditions. Tempted to have a few bob on it myself at some stage.

LOL You nailed it :D I like the middle ground of the racetrack, (opps sorry rag trade), it occupies Brend. PE is undemanding, excellent management, great stock turn, robust balance sheet, superb and consistent fully imputed dividend yield.

[winner69]

Probably an innocent reason like after todays Board meeting or something ......but take solace its not after close of business tomorrow just before a long weekend (bad)

https://www.nzx.com/companies/HLG/announcements/279761

[Raz]

I await with interest.

[winner69]

Almost a late afternoon end of week and hope nobody will notice announcement.

Arbrosth - will update my model later. I think the beers on you still

Outlook
Group sales for the first 7 weeks of the season are on a par with last year although there remains pressure on margin. The record temperatures in both New Zealand and Australia have not been conducive to early autumn sales and the retail environment in fashion apparel remains challenging.

On a more positive note our ecommerce business continues to outstrip growth in bricks and mortar stores, with sales for the first 7 weeks of the season up 38%. We anticipate this trend to continue and continue to put focus and investment into this part of our business.

[winner69]

First thing i noticed

Operating Cash Flow $0.977m - same period last year $14.687m. (And sales were flat remember)

Not much of a cash flow is it

Least they dipped into the surplus cash to pay the $9.8m dividend to keep punters happy

[Beagle]

Took profits on this with thanks to the Reserve bank of New Zealand for boosting yield stocks. My horse looking a bit tired.

[Raz]

Took profits on this with thanks to the Reserve bank of New Zealand for boosting yield stocks. My horse looking a bit tired.

Yep, thats ugly operating cashflow,not really surprised, wished I had be wrong on this result.

[percy]

Took profits on this with thanks to the Reserve bank of New Zealand for boosting yield stocks. My horse looking a bit tired.

Pet food next?

[malus]

Pet food next?

Hmm... believe Roger's already into pet food Percy... with Scales that is!

[percy]

Hmm... believe Roger's already into pet food Percy... with Scales that is!

Aren't we all.?
And doing very nicely too.!!!lol.

[IAK]

I'm not surprised, better clothes at the Warehouse (than Hallensteins) this summer IMO. Also, It seems all the big sporting brands are moving into the casual wear space (e.g., Rebel Sports).

[winner69]

Yep, thats ugly operating cashflow,not really surprised, wished I had be wrong on this result.

One of the reasons seems to be that usual H1 decrease in inventories didn't happen this time around. Usually a $4m-$5m reduction occurs (the summer stock that sells over Christmas)

They now have $4m more stock than this period a year ago - and sales about the same

Overstocked - not a good place to be when the pressure is on. Might lead to aggressive discounting which won't help the already depressed margins.

[James108]

So.. they are potentially overstocked by $4M, if aggressively discounted maybe they make a loss of what $500k? $1M? (my guess would be less) on that $4M as opposed to what? $200k profit.

Meanwhile $7M wiped off the value of the company today, pays to keep things in perspective.

[winner69]

So.. they are potentially overstocked by $4M, if aggressively discounted maybe they make a loss of what $500k? $1M? (my guess would be less) on that $4M as opposed to what? $200k profit.

Meanwhile $7M wiped off the value of the company today, pays to keep things in perspective.

James - that $4m odd of stock HLG would expect to sell for $10m (and make $6m margin). Would have improved cash flows significantly if they had sold it through eh (as they normally do at this time of year)

Did you notice that HLG cash position at 1 Feb was $12.7m - the lowest its been for many years and nearly half of what it was a year ago. And $9m of this is tagged as your upcoming dividend so lets hope they are moving this stock in this 'challenging retail environment'

(PS - discount that stock by 20% say and $2m of expected margin goes begging)

[winner69]

So.. they are potentially overstocked by $4M, if aggressively discounted maybe they make a loss of what $500k? $1M? (my guess would be less) on that $4M as opposed to what? $200k profit.

Meanwhile $7M wiped off the value of the company today, pays to keep things in perspective.

Maybe, just maybe, the 2 are connected.

Maybe the not so flattering report (which showed the increase in inventories) was the cause of the $7m being 'wiped off the value of the company today'?

[winner69]

HLG free cash for 1/2 year negative $1m

Dividend paid out in period $10m


Hmmm

[percy]

Logistics of retail.
You must sell through.
Space is at a premium in retail.
Slow/old/dead stock takes up valuable space.New stock can't be properly displayed because there is no room to display it.
Your clearance stores are also overloaded.Your whole distribution chain gets bogged down.Then stock needs to be doubled handled.
Disaster.The market knows the full meaning of this, and has started to value HLG accordingly.
HLG are also suffering from the affects of a low NZ $ on their margins.Cost of stock is a lot higher, and competition means they can't just put up their selling price.Occupancy costs just keep on raising.
That competition not only includes Rebel Sports,The Warehouse,The Farmers,Ezibuy,and Postie Plus,but very strong new entrants will make big inroads in HLG's market.

[Beagle]

Its concerning that the Warehouse and Briscoes seem to be doing okay in the prevailing environment whereas the former market darling of the rag trade is struggling.
Its not like the exchange rate is all that tough being somewhere in the mid to late 60 cent U.S. range is around the 20 year average so called Goldilocks level.
Stock hasn't moved through as freely as it has been and one wonders if this is specific to recent seasons, (some slightly off choices with styles for the spring / summer ?) or whether its symptomatic of bigger issues surrounding the ongoing proliferation of brand choice and changing customer purchasing trends ?

[James108]

Maybe, just maybe, the 2 are connected.

Maybe the not so flattering report (which showed the increase in inventories) was the cause of the $7m being 'wiped off the value of the company today'?

I realise the two are connected, most of the report was telegraphed in advance, which leaves their cash flows. Thanks for pointing out my error, inventories are listed at lower of net realiseable value and cost.

So using Rev/COGS ratio of 2.3 (from HY report), that $4M Inventory would be $9.2M in revenue (including 5% NPAT margin). Now if that $9.2M was agressively sold off at a 40% discount, on top of whatever 'sales' are normal that is a loss of approx $3.7M (including opportunity cost of not having sold those same customers something else instead at a higher margin).

I am trying to quanitfy how much this may cost HLG if they do in fact have an excess of inventory. I note that at FY11 to FY14 inventory levels ranged from $18.2M to $20.2M, I cannot find the half year reports. I am not saying HLG are undervalued or overvalued I simply thought the market reaction to this news was over the top.

Also I do not think their cash position is just due to over purchase of inventories, Maybe lumpy payment terms to suppliers?? how does $4M extra inventory = $14M in extra payments to suppliers?? They also paid $5.2M (HY15 $4.2M) and tax bill for HY16 was only $2.7M.

[winner69]

James, from my database HLG Inventory numbers

Feb13 $11.6m
Aug13 $20.2m
Feb14. $14.6m
Aug14 $19.9m
Feb15 $15.9m
Aug15 $19.8m
Feb16 $19.6m

Note the past seasonality - reflects the well managed company HLG is.

But something not right this year - stock levels did not come down as they usually do.

I dont think the price over reacted yesterday. Remember when they signalled all this it went down to $2.80 odd - and the announcement this week didnt have any good news (except the on line bit)

[noodles]

Now if that $9.2M was agressively sold off at a 40% discount, on top of whatever 'sales' are normal that is a loss of approx $3.7M (including opportunity cost of not having sold those same customers something else instead at a higher margin).

This is what I observed at St Lukes Mall a couple of weeks ago. Their revamped Glassons store was close to empty, but the their sale area (in a different area of the mall) was very busy. Everything in the sale area was $10. Now I would expect that that stock is being sold off at way more than 40% off. Perhaps 50-80%

So was their sales area taking customers away from the proper store?
I think they might have been better to offloading the stock to charity.

[Beagle]

This is what I observed at St Lukes Mall a couple of weeks ago. Their revamped Glassons store was close to empty, but the their sale area (in a different area of the mall) was very busy. Everything in the sale area was $10. Now I would expect that that stock is being sold off at way more than 40% off. Perhaps 50-80%

So was their sales area taking customers away from the proper store?
I think they might have been better to offloading the stock to charity.

Yeap I saw that too which got me a little itchy and pre-disposed towards the sell button. It is a genuine concern when they have to resort to selling everything at $10...must have been really good value because my canny wife with Scottish blood was buying it :) On the other hand both HLG and Glassons stores were really pumping like crazy with new year's sales in early January. Hard to figure that the retail environment could change that much in two months...guess that's what happens when you get left carrying the baby with excess summer stock !

HLG was good value when I bought in on 17 February at $2.74 cum divvy but looking at the actual result, stock level and poor cash flow I thought it prudent to sell for a very modest profit. Really all that happened between late February and March was Mr Wheeler kindly handed high dividend yield shareholders a free lunch as nothing about the companies performance would appear to merit a re-rating between then and now.

It would have to go back to $2.74 less the 13.5 cent divvy = $2.60 ex divvy for me to consider another punt on this one.

[James108]

Interesting I did not know they had a sales area in a different part of St Lukes, sounds like they did end up with too much inventory.

Any idea on this?

Also I do not think their cash position is just due to over purchase of inventories, Maybe lumpy payment terms to suppliers?? how does $4M extra inventory = $14M in extra payments to suppliers?? They also paid $5.2M in tax (HY15 $4.2M) and tax bill for HY16 was only $2.7M.

[winner69]

Interesting I did not know they had a sales area in a different part of St Lukes, sounds like they did end up with too much inventory.

Any idea on this?

Also I do not think their cash position is just due to over purchase of inventories, Maybe lumpy payment terms to suppliers?? how does $4M extra inventory = $14M in extra payments to suppliers?? They also paid $5.2M in tax (HY15 $4.2M) and tax bill for HY16 was only $2.7M.



Their payables figure is generally quite seasonal and higher in August than February. Movements in payables/creditors in this 1/2 doesn't look unusual

Whatever the cause operating cash flow of $1m is pretty poor considering they need somewhere near $18m a year to maintain the dividend without diving into cash reserves. (Feb cash balance lowest its been for many years)

I just struggle seeing them generating that much cash over the next 1/2 year.

They'll probably reduce the next dividend a bit and even if cash flow doesn't cover it they'll just go back we have confidence in the future trick so can afford it anyway.

[winner69]

Retail Watch (electronic card spend) had Clothing and Footwear category February sales 2.5% on pcp.

Thats reasonably positive even though HLG say their sales are on par

[winner69]

HLG say - Group sales for the first 7 weeks of the season are on a par with last year ......On a more positive note our ecommerce business continues to outstrip growth in bricks and mortar stores, with sales for the first 7 weeks of the season up 38%.

Annual report says ecommerce sales were just over 5% of total sales.

Umm - with ecommerce up and the total flat means bricks and mortars DOWN (by at least 2% which is not good)

[percy]

This is what I observed at St Lukes Mall a couple of weeks ago. Their revamped Glassons store was close to empty, but the their sale area (in a different area of the mall) was very busy. Everything in the sale area was $10. Now I would expect that that stock is being sold off at way more than 40% off. Perhaps 50-80%

So was their sales area taking customers away from the proper store?
I think they might have been better to offloading the stock to charity.

Trying to move old/slow moving stock in retail is very difficult.
In my bookshop I used to put a table out the front store.
Price the stock to sell within a week and dump any books unsold.
When I had a toy shop I would have a pre Xmas sale at the end of November,and clear my bad buys before Xmas.
Now with my home based book selling I take all my old/dated stock stock to my friend's Paper Plus.I remove all price stickers and tell him to price it to clear.We go halves in what he gets for it.Saves dumping fees.!

[GR8DAY]

Last week I think to pick up a mighty juicy dividend.....a whopping 13.5cps! (one of the best yields on the NZX I believe?)........work that out for just 6mnths. Enough to make a banker cry at his desk.

[BeeBop]

Last week I think to pick up a mighty juicy dividend.....a whopping 13.5cps! (one of the best yields on the NZX I believe?)........work that out for just 6mnths. Enough to make a banker cry at his desk.

I am with you on this one BUT for me my spare cash means that it is probable marginal as to whether I can dip in and dip out and I am deciding between HLG and HBY - I don't want to dilute between the two options. HLG looks like a short-term gain on divi but HBY could be a longer term option. I have a bit more reading to do before the market opens on Monday!

[percy]

I am with you on this one BUT for me my spare cash means that it is probable marginal as to whether I can dip in and dip out and I am deciding between HLG and HBY - I don't want to dilute between the two options. HLG looks like a short-term gain on divi but HBY could be a longer term option. I have a bit more reading to do before the market opens on Monday!

Interesting bit of reading you will have to do.
Deciding whether to buy HLG which is a retailer,and HBY who are trying to sell their retail holdings.
Why would they ever want to sell out of retail while you are thinking about buying into it?
Do HBY know something you don't know,or do you know something HBY don't know?
Keep reading.

[Lewylewylewy]

I sold my hlg a few weeks ago. I like them just fine, but the don't fit my new strategy, which is to build a buy and hold portfolio. I figure that at any time within the next decade a popular foreign store could set up in NZ. Besides, I'm not sure hlg have been diversifying and growing

[BeeBop]

Interesting bit of reading you will have to do.
Deciding whether to buy HLG which is a retailer,and HBY who are trying to sell their retail holdings.
Why would they ever want to sell out of retail while you are thinking about buying into it?
Do HBY know something you don't know,or do you know something HBY don't know?
Keep reading.

HLG for me would be a short term dip and out (for dividend only), my concern is that the dip in and out could be negated by a drop in share price (I do note that the NZD has appeared to settle for a while. I already have retail in the UK and yes, it is not doing very well at all except for those that have a good portion of on-line sales and have special offerings. NZ retail does appear to be dreadful: PPL case in point (I chose MHI instead of PPL a few years ago), at the time the metrics were similar but the shopping experiences quite different (PPL over here is a cramped messy shop with no active sales people in it compared to the NZ branches at the same time in NZ). SOmetimes retail does give a good short-term gain e.g. Sainsbury on the London Exchange. This approach helped me get started in my earlier years.

HBY are now a business company rather than what they used to be as a holding company and their retail has never been great. I remember back years ago when they had Hannahs (?), it was a mere run of the mill shoe company and the offerings got cheaper and cheaper, I really can't see any point of difference between the low end shoe stores

HBY certainly have several strings to their bow, their metrics meet my "rules", however, I remain concerned about the contract business and am not convinced by the teleconference confidence in the improvements (but I don't know a lot about it yet). As yet, I have only finished page 3 of the interim result conference, so it will take me a while. The HBY thread is a good one and methinks the price is a good entry price.

[BeeBop]

I sold my hlg a few weeks ago. I like them just fine, but the don't fit my new strategy, which is to build a buy and hold portfolio. I figure that at any time within the next decade a popular foreign store could set up in NZ. Besides, I'm not sure hlg have been diversifying and growing

Agree with you there mate: wouldn't put it into a buy and hold - doesn't meet my rules although the base metrics do! Again, nothing special about them - aren't H&M moving into AUckland? Can clothe my kid quite cheaply and nicely from H&M (they are in the Gulf and have good stores). Noted last time I was in NZ that Farmers have good offerings now and have some good marketing going on - attended a ladies dressing style evening and they gave out vouchers, so I went into the store the next day and spent 3x the voucher value.

[GR8DAY]

Can someone confirm (or otherwise) that the upcoming divi is fully imputed? I thought I read somewhere that it was but cant seem to find that piece of info again. Thnx.

[winner69]

Can someone confirm (or otherwise) that the upcoming divi is fully imputed? I thought I read somewhere that it was but cant seem to find that piece of info again. Thnx.

Yep - 5.25 cents imputation credits

I think you knew the answer

[winner69]

My not so young neighbour seeking better returns than term deposits bought a lot of HLG for the dividend (and a few other shares). Hasn't owned shares much in his life

He told me over the weekend he is happy as Larry with the dividend but confessed he paid $3.34 for them in January and now laments what he has done (losing money) He said he was pretty dumb eh as he didn't think shares could go down so much.

I told him just to hang in there - it will come right eventually ....good advice?

[GR8DAY]

Yep - 5.25 cents imputation credits

I think you knew the answer


........no didnt know the answer Winner, why would I have asked? (got better things to do like mow the lawns) Sounds like the answer is no.......not FULLY imputed?.......or are you saying the 5.25c gets ADDED to the 13.5c to show a GROSS equivalent dividend of 18.75c........is that how it works? (Im no bean counter)

[Beagle]

I think he'd be better off in a safe REIT like ARG or GMT. PIE status so the 5.1% yield is net in his hands and if he's on the top 33% tax rate that's a (5.1 / 0.67) = 7.6% gross return.

FWIW Chris Lee had a fair bit to say about older investors having to take on board some risk to maintain their income level's in his most recent newsletter and a good mention of REIT's.

HLG look a bit vulnerable to me to further downside but at the right price I'd jump on for another ride around the paddock :)

[winner69]

........no didnt know the answer Winner, why would I have asked? (got better things to do like mow the lawns) Sounds like the answer is no.......not FULLY imputed?.......or are you saying the 5.25c gets ADDED to the 13.5c to show a GROSS equivalent dividend of 18.75c........is that how it works? (Im no bean counter)

Sorry

Yes thats how it works - ADDED

Get 13.5 cents in the hand and 5.25 cents tax credit.

The 5.25 cents is 28% (company tax rate) of 18.75 cents (13.5 + 5.25) if you wanted to know how its calculated

[winner69]

I think he'd be better off in a safe REIT like ARG or GMT. PIE status so the 5.1% yield is net in his hands and if he's on the top 33% tax rate that's a (5.1 / 0.67) = 7.6% gross return.

FWIW Chris Lee had a fair bit to say about older investors having to take on board some risk to maintain their income level's in his most recent newsletter and a good mention of REIT's.

HLG look a bit vulnerable to me to further downside but at the right price I'd jump on for another ride around the paddock :)

I tell him that

I asked him why he chose HLG and his other stocks. Answer 'thats what the guys down the bowling club are doing'

I feel there is a lot of ignorance out there and as the oldies move from bank deposits to shares there will much sadness in a year or two when interest rates start rising and share prices (many currently being valued as a bond) start falling

[GR8DAY]

Sorry

Yes thats how it works - ADDED

Get 13.5 cents in the hand and 5.25 cents tax credit.

The 5.25 cents is 28% (company tax rate) of 18.75 cents (13.5 + 5.25) if you wanted to know how its calculated

....many thanks Winner. Sounds even better than I thought.

[winner69]

....many thanks Winner. Sounds even better than I thought.

Don't spend it all at once

You keeping the shares for the next dividend?