"Valuations nay old school" ........was my sense-of-humour as recent increases for HLG have nothing to do with valuations as everything is currently guess work maybe a raving bargain or another KMD
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Honestly I don't think market cares and is trying to eke out the bubble for another 2 months and will make money where money is to be made, buying where things are oversold. Disc this would be the first bear and black swan I've been through so I'm not talking from any experience, just what I think will happen
Completely agree. I wouldn't touch this sector at all. A quick list of all the retail companies that went bust in the UK in 2019, prior to any COVID related issues:
- Bonmarché
- Watt Brothers
- Khaadi Fashion
- Gerry Weber
- Forever 21
- Karen Millen and Coast
- Jack Wills
- Laura Ashley
- Arcadia retail empire
- Stefanel
- Select
- Debenhams
- Pretty Green
- LK Bennett
- TReds
Appreciate NZ is a different market, but ASOS and Boohoo will rise in the same fashion as Amazon and impact all home-grown retail companies.
obvs HLG do something different to all those failures
Only two weeks ago or less they advised you that Group sales for the six months to 1 February 2020 were $160.27 million, an increase of 5.7% over the corresponding period last year ($151.66 million) with a Net profit after tax of $15.44 million,
that's nearly 25c per share earnings in six months. So why you comparing them with belly up businesses.
No real comparison really to those other ones, which turned belly up
Knowing the Rag Trade very well, I would say HLG are very respected & astute operators
Their financials reflect a solid very well run operation, with a sound balance sheet &
long history of sound earnings & dividend history
Aside from seasonal working capital requirements & perhaps the odd extraordinary event,
how many other Operators are there in Retail with little or no external debt ?
I would be more concerned with KMD even after their recent Cap Raise, as the market
seems to be suggesting in pricing even carrying through to BGP as a diluted stakeholder
HLG will get through this okay but no way are they worth anywhere near the closing price on Thursday in my opinion. Overpriced by at least $1.
Just saying, retail is tough. Customers are fickle. You are braver than me.
For sure 'Retail is tough & Customers are fickle'
but HLG have a long proud track record of cracking the market both here in Aussie (even tougher)
in a backdrop of others in the game falling over
Who knows, with things awash in Govt injected Ca$h & in places nowhere to spend aside from Essentials, it wouldn't
surprise if some Retailers (HLG BGP & TWH etc) didn't have some bumper trading weeks when things reopen
to make up for weeks closed..
HLG are near the top of my list to add further
I note Beagle's earlier very good comment that they may be overpriced, however their track record
with sound financials appears better than others. No Apr 20 Dividend is a small sacrifice to secure further
as the market seems to concur.
Winter 20 Indent/Season may be curry or affected to a degree, but beyond that with reopening they should rebound
I remember looking closely at HLG back 2-3 years ago at around $3 levels, but never moved at the time
I regard WHS HGH OCA MET MHJ ANZ & WBC as possible value/rebound stocks for the future
along with a further list of 'punts' which may deliver quite well
the bounce was highly predictable ( maybe not the size ) at 1.80 it was way oversold ( probably over bounced now but looked like someone was agressively pushing the price up ). I still stick to my view for each % decline in sales the need to raise cash becomes more important. the no dividend policy i would imagine stays in place all year to cover the lease obligations. staff culling will take place as well to some degree along with inventory sell down if possible to raise cash. But as a retailer you can only cut so much and the fixed costs will bite you. So my pick raise some bank debt or cash issue?
In the US cpi announced this week apparel prices dropped 2%
I'm seeing HLG adds everywhere online right now, this will be emphasised because I opened one up to take a look which always results in more but hopefully they're selling a bit online.
I've certainly got a lot more spare $$ in the bank account due to everything being shut so perhaps I will get some new clothes.
Good reason to be very cautious with retail stocks, especially apparel with operations on both sides of the Tasman. https://www.nzherald.co.nz/business/...f=recommended\
We also shouldn't overlook the possibility that when lockdown restrictions are lifted in N.Z. we could see a spike in numbers and them have to revert to lockdown again, and again. I have always maintained that most people want to try clothes on for fit and to feel the fabric before buying. Sure their online sales will go up, but its not going to be a panacea for all their wows by any stretch of the imagination. I maintain my view that the bounce on this has been substantially overdone.
Huge amount of water to go under the bridge before retail looks anything like what it did before Covid 19.
Glassons target market don't necessary think that way Beagle. Young females I know are very happy to order stuff online then send it back if they don't like it, ASOS are hugely successful with this business model. I think men are more likely to want to buy clothes in a physical store though.
Agree that retail is in for tough times, I think fair value of HLG is around $3.50 at the moment based on a simple DCF model and that includes them making a loss this year. If they don't make a loss or profit recovers more quickly than I anticipated fair value would be much higher.
I simply think at an absolute minimum Thursday's 65 cent bounce is based on nothing but hope that this lockdown is a one off event and then its done and dusted. I don't see it that way. I think patronage at malls will be affected for a very, very long time. Online is 15% of their business model if I remember correctly. Maybe this goes up to 20% but that's still ~ 80% of their business that's materially affected for quite some time and how much will they lose in FY20 and maybe FY21 as well ? Too many unknowns for my liking.
You touch on the key thing that a potential investor needs to "calculate" at present, and calculate isn't the right word, because man, are there a wide range of outcomes...
Let's look at this as four variables
W = Current sales of the business in a lockdown state eg web sales.
X = Current expenses of the business in a lockdown state, eg assume wage subsidies and rent negotiated as low as zero as possible.
Y = Sales of the business once the lockdown is over.
Z = Expenses of the business out of lockdown, eg no wage subsidy (perhaps after a transition period where it was still paid?), rent closer to normal or normal.
Everybody is investing knowing that W - X = nothing good, while the lockdown is on, and arguably, it is right to look past this period, especially if the balance sheet is decent.
But I think people are starting to assume that Y - Z = something close to normal, but is that actually a safe assumption?
Once the lockdown is over, it is far more likely that Z returns to something more like normal than Y returning to something more like normal, at least for a while.
Given that wages and rent are such huge costs for retailers, it is actually possible that W - X produces less of a loss than Y - Z does, at least for a possibly prolonged ramp up period.
Also remember one of the main killers of businesses is fast growth. We're taught to see the rewards of fast growth, but fast growth periods are exceptionally dangerous for a business as expenses tend to ramp before revenues, systems, processes, teamwork and morale are tested etc etc.
We have a virtually unprecedented situation here : Previously low growth businesses basically halt completely. Then we want (need?) them to go from zero to lots very quickly.
I don't think that is going to go as smoothly in many cases as people expect, and people who have run businesses (especially those with lots of people) can probably appreciate some of the reasons why.