HLG - Hallenstein Glasson

[Rawz]

DarkHorse buying up big

[Muse]

Would love to hear any thoughts on whether there's likely to be pickup in Glassons roll out in Australia?

at the end of FY17 Glassons AU had 28 stores - now they have around 36 - so around 1.5 net new stores per annum. Covid probably slowed the pace of new store openings. In the last two financial years they have really focused on renovating and expanding their existing stores in Australia and spent considerable capex doing so and at this half year period probably mostly done with the Australian store refresh & extension programme, and could possibly turn their attention to more rollouts. At the AGM at the end of last year if I recall correctly there was a comment made about a store # goal over the next few years (can't remember exactly what it was) but it implied - if it was true or I heard correctly -a pickup in new store openings in the near/medium term. The Board appears to be conservative on new store openings, more so than James Glasson (CEO of Glassons AU), and don't know where the new group CEO sits yet. The store outlook in NZ for both brands is flat to probably net declining in the near term as trading conditions languish on this side of the ditch.

have picked up a few positions in retail stocks again this year incl. HLG acquiring a respectable holding in mid february, to compliment the Uni share I bought (again) last year which have been on a tear. I expect HLG's GP margins will have improved 200-300bps on last year's 1H with lower freight prices and a (slowly) stabilising fx environment. CODB inflation per ave store looks to have slowed in 1H as the business likely had some one off costs in 2H FY23 and undertook some cost management. The new transfer pricing policy a big help too (something I encouraged the business to do two years ago), should result in the average effective tax rate dropping from 29.4% last year to ~28.5% this year (a 500-600k increase to NPAT pa) but more importantly will allow much improved levels of imputation credits available going forward (assume ~75% imputed vs 56%, 0%, 53% across 1H FY22, 2H FY22, 1H FY23 respectively).

that said the trading outlook is inconsistent and patchy across both geographies. NZ we read about, and australia has benefitted in the last 12 months from an unexpected surge in migration particularly amongst students. I saw a report that spending by international students accounted for more than half of AU's economic growth in 2023, which warned that the new sharp increase is visa refusal rates will be a headwind to growth in 2024 across retail and the wider economy. A new migration policy was released in December that called for a 38% reduction in migration going forward.

so going forward hard to predict - lots of positives and negatives - but that's the way isn't it.

[Muse]

few other bits and bobs people may find of interest

* Glassons NZ google search trends (rolling ave 4 weeks): down 8.5% on prior year
* Glassons AU google search trends (rolling ave 4 weeks): up 7.6% on p/yr (declining from +20% last Jan.)
* Glassons Similarweb traffic rank for Australian Fashion & Apparel in Feb24 up to 20, vs ~25ave over preceeding 12 months

apparel retail in AU remains as competitive as ever. Perfect Stranger & supre growing strongly, princess polly holding steady. Temu and more relevantly Shein having absolute break outs in the industry - shein on track to do A$1bn in sales in australia in the coming 12 months. slightly different product offering but close enough and value focused.

flash industry data - first few weeks of March have been reasonably tough - highlighting the inconsistent trading environment. plus swifty tour done!
https://kepleranalytics.com/week-ending-10-03-2024/
https://www.westpaciq.com.au/economi...r-1-march-2024

[DarkHorse]

at the end of FY17 Glassons AU had 28 stores - now they have around 36 - so around 1.5 net new stores per annum. Covid probably slowed the pace of new store openings. In the last two financial years they have really focused on renovating and expanding their existing stores in Australia and spent considerable capex doing so and at this half year period probably mostly done with the Australian store refresh & extension programme, and could possibly turn their attention to more rollouts. At the AGM at the end of last year if I recall correctly there was a comment made about a store # goal over the next few years (can't remember exactly what it was) but it implied - if it was true or I heard correctly -a pickup in new store openings in the near/medium term. The Board appears to be conservative on new store openings, more so than James Glasson (CEO of Glassons AU), and don't know where the new group CEO sits yet. The store outlook in NZ for both brands is flat to probably net declining in the near term as trading conditions languish on this side of the ditch.

have picked up a few positions in retail stocks again this year incl. HLG acquiring a respectable holding in mid february, to compliment the Uni share I bought (again) last year which have been on a tear. I expect HLG's GP margins will have improved 200-300bps on last year's 1H with lower freight prices and a (slowly) stabilising fx environment. CODB inflation per ave store looks to have slowed in 1H as the business likely had some one off costs in 2H FY23 and undertook some cost management. The new transfer pricing policy a big help too (something I encouraged the business to do two years ago), should result in the average effective tax rate dropping from 29.4% last year to ~28.5% this year (a 500-600k increase to NPAT pa) but more importantly will allow much improved levels of imputation credits available going forward (assume ~75% imputed vs 56%, 0%, 53% across 1H FY22, 2H FY22, 1H FY23 respectively).

that said the trading outlook is inconsistent and patchy across both geographies. NZ we read about, and australia has benefitted in the last 12 months from an unexpected surge in migration particularly amongst students. I saw a report that spending by international students accounted for more than half of AU's economic growth in 2023, which warned that the new sharp increase is visa refusal rates will be a headwind to growth in 2024 across retail and the wider economy. A new migration policy was released in December that called for a 38% reduction in migration going forward.

so going forward hard to predict - lots of positives and negatives - but that's the way isn't it.

Thanks Muse, I appreciate your helpful insights. Obviously HLG has pretty good cashflow for the price, so whether they can get a good ongoing ROIC through Glassons Australia rollout is the key question for long-term prospects. Haven't bought any yet though - stocks always rise while I contemplate buying - and fall while I consider selling!

[Rawz]

https://www.nzx.com/announcements/428314

CEO selling half his holding. hmmm

[IAK]

Building a 'mega' deck?

https://www.nzx.com/announcements/428314

CEO selling half his holding. hmmm

[Rawz]

Building a 'mega' deck?

Yes this is a big job. Deck, spa pool, pergola, built in 12 burner gas bbq and beer fridge.

Fair enough selling a few shares. Work hard play hard.

A shame he had to sell at the bottom thou? or?

[Muse]

https://www.nzx.com/announcements/428314

CEO selling half his holding. hmmm

EX ceo - now at Farmers

[Rawz]

EX ceo - now at Farmers

Oh I see. No cause for alarm then

[Count von Count]

Was at Melbourne Central on Saturday, shopping for my teenagers.

Every women’s clothing outlet had a minimum of 20% off… except Glassons, which had nothing advertising a sale.

At or around 10:30am, there were between 0-1 customers in all women’s clothing stores… except Glassons, where there were 6.

It was an interesting contrast…