HLG - Hallenstein Glasson

[Waltzing]

well a diversified retail portfolio is recommended.

but WHS report was 1Q heavily impacted but they have clearly stated that 2HYTD 22 is expected to track 2HYTD 21.

55 BPS is surely not a big deal.

Big MR B is correct when if WHS 32 CPS is on the money that No growth and HLG AUS GLASSONS sales is where HLG has growth potential.

Least we not forget this statement from the CEO's last address to the solders on the front lines...


"The first 20 weeks of the new financial year have seen Group sales decline ‐10.14% on the prior year, this has been driven predominantly by multiple store closures across both New Zealand and Australia inresponse to the recent COVID‐19 outbreaks in both countries."

Gosh 10-14% in the first 20 weeks!!!

That should impact NPAT.

Now that is a similar story to WHS but with a brighter future.

[BlackPeter]

How are you feeling about your WHS shares now after today's shocking trading update and massive profit downgrade ?
Be some good opportunities to double down on Monday, get stuck into it if you still believe the story.

Good question ... I was busy today (with much more pleasant activities than watching the share market) and thankfully the company gave me a full weekend to digest the news before there is anything I need to do :

Suppose I won't queue up for selling on Monday morning ... and watch the trend.

So far I see that more as a Covid blip - this HY was certainly not normal trading conditions.

[Beagle]

Good question ... I was busy today (with much more pleasant activities than watching the share market) and thankfully the company gave me a full weekend to digest the news before there is anything I need to do :

Suppose I won't queue up for selling on Monday morning ... and watch the trend.

So far I see that more as a Covid blip - this HY was certainly not normal trading conditions.

I've crunched the numbers already on that thread for you. I agree its not a normal year. Normal to me for them looks like $100-$110m. About 30-32 cps...choose your own PE. I'm going with a no growth PE of 10.5 because I believe most of the big nesting spending people have been doing at Noel Leeming is behind us and FY21 was indeed a one off bonanza not to be repeated. No doubt you'll see it differently.

[BlackPeter]

I've crunched the numbers already on that thread for you. I agree its not a normal year. Normal to me for them looks like $100-$110m. About 30-32 cps...choose your own PE. I'm going with a no growth PE of 10.5 because I believe most of the big nesting spending people have been doing at Noel Leeming is behind us and FY21 was indeed a one off bonanza not to be repeated. No doubt you'll see it differently.

... maybe better continued on the WHS thread ...

https://www.sharetrader.co.nz/showth...l=1#post935264

[Beagle]

Just to keep the discussion as well relevant for HLG (where this discussion started) ... projected average EPS in my model for HLG would be 58 cents ... which means that both shares end up with a quite similar forecasted PE (though Warehouse is still a bit cheaper). Obviously - if you think HLG will grow faster, than by all means, stay with them.

I certainly do. Glassons Australia has a clearly demonstrated 5 year history of fast growth and they even grew really fast in FY21 despite lockdowns being prevalent for significant parts of that year. HLG has a very exciting future ahead of it.

[Muse]

I certainly do. Glassons Australia has a clearly demonstrated 5 year history of fast growth and they even grew really fast in FY21 despite lockdowns being prevalent for significant parts of that year. HLG has a very exciting future ahead of it.

FY21 was a sensational for most of our retailers - Briscoes, HLG, WHS, & MHJ. All would have seen revenue, earnings & dividend growth on the prior year and very strong SP performances . Despite the visceral impact of lockdowns the redirection of tourism spend, drop in interest rates, transfer payments & economic stimulus, rental concessions, wages subsidies (for those who kept them) & wealth effect from rising house prices more than offset it for retailers. Its ironic then that fy21 while having lockdowns had probably the most supportive economic environment for retail in recent memory.

I do not see that environment continuing and while there are some very WHS specific features to WHS’ profit warning it is in my view a prelude of falling earnings for the retail sector.

[Beagle]

Glassons Australia has a clearly demonstrated 5 year history of fast growth

That's a lot longer than the flash in a pan flush that Covid's provided other retailers. I think I know this company extremely well and I disagree.

Further, I think that international travel expenditure will be severely crimped for the foreseeable future. $9 Billion a year will be spent somewhere and most of the big "nesting" spend is done and dusted . I think a lot of people have worn their wardrobes out a fair bit during lockdown too. That's how I see it mate. People want to get out and socialize again and some want to peacock and we all want to look our best doing it despite many of us having packed on the weight during lockdown and needing a new wardrobe.

[Muse]

Glassons Australia has a clearly demonstrated 5 year history of fast growth

That's a lot longer than the flash in a pan flush that Covid's provided other retailers.

Thats true. But it doesnt mean FY21 wont be a high watermark for a year or two (or three?)

[Beagle]

Thats true. But it doesnt mean FY21 wont be a high watermark for a year or two (or three?)

Two or three may be a fair call.
As I said recently mate, I foresee Covid impacting their DCF by about 20-30 cents. I have them at fair value over $10 based on the very strong growth in Australia and the huge addressable market over there. I'd like to think they can do eps of 50-55 cents in FY23 (55.86 cps in FY21) and kick on to a new high in FY24...time will tell. I have them on a prospective FY23 normalized PE of 12.8 @ $7 (ignoring any possible impact from Covid in that year) and I think that's very cheap considering the growth rate of Glassons Australia.

I'm expecting another 20-24 cent fully imputed dividend in April so we're certainly being paid so handsomely its very easy to be patient.
No stock is risk free but I think this like HGH and TRA is a classic GARP stock and growth at a reasonable price is a great place to have capital invested in a rising interest and inflation rate environment.

[Muse]

Glassons Australia has a clearly demonstrated 5 year history of fast growth

Further, I think that international travel expenditure will be severely crimped for the foreseeable future. $9 Billion a year will be spent somewhere and most of the big "nesting" spend is done and dusted . I think a lot of people have worn their wardrobes out a fair bit during lockdown too. That's how I see it mate. People want to get out and socialize again and some want to peacock and we all want to look our best doing it despite many of us having packed on the weight during lockdown and needing a new wardrobe.

Yeah I agree travel not taking off anytime soon. But I also don't think it'll remain at - well - effectively zero either. Domestic travel will soak up a little, and the australians will probably get a taste for it more quickly than the kiwis. Whatever the scale there will be a negative impact from this.

Going forward the next few years the retail sector will probably be presented with a different suite of issues to navigate, apart from covid. Namely input inflation, labour inflation, rental inflation (or at least withdrawl of landlord support), and rising interest rates (& potentially stalling housing market) - in quantities we haven't had to deal with since ~2007.

I'm in the same boat as you beagle - i hold a very large parcel in briscoes purchased at low prices. I am tempted to reduce but I don't really mind the up and downs - the company has great cashflows and history of paying strong dividends - the companies will endure and I am quite committed to maintaining my tax position. We've enjoyed superlative dividends off those purchases.

I have no doubt HLG will continue to execute well. Potentially 3 new stores in FY22 in Australia, ecommerce in america. Australian fast fashion is similar to large swaths of America, particularly california which would represent a logical geographic expansion in time. While at a cheaper end of fashion, whose customers like the value proposition (and at first glance wont like HLG passing on rising costs), they also aren't by and large heavily indebted homeowners struggling with mortgages, the economy is at full employment with entry level and early employment wages rising, so who knows glassons could have some pricing power as it will still be a comparative bargain. Glassons are on their game in terms of creating a sense of scarcity for key products and have built a great brand in australia.

no doubt HLG will navigate the changing landscape better than most. i'll be waiting in the wings for the next few years looking to average in at lower prices as they navigate them.