HLG - Hallenstein Glasson

[Snoopy]

Good post Snoopy.
And I agree, they are a top player and logic says they will come out OK.
But the thing right now is the uncertainty.
No one knows.
Will this be 4 weeks, 4 months, 1 year?

Because of the unknown.

This is where you can make some educated guesses.

The share price of mall owners the Kiwi Income Property Group has fallen by about 50% over the last month. That equates to the market expecting a 50% fall in income. Some of that fall might relate to businesses that do fail. So for businesses that remain, lets say they negotiate a base price rent fall of 30% (base rent now 70% of what it was). And to encourage mall owners to do this, they might negotiate a greater percentage of turnover as compensation.

Now we look at the one off hit before the rent negotiation

If:

1/ the shopping ban closes stores for 4 weeks AND
2 / the average rental cost per square meter is known, AND
3/ the average size of store is known AND
4/ the number of stores to be closed down is known

THEN a one off figure for 'rent due without income' can be calculated.

You could repeat this exercise for four months, and then a year, to see what a longer 'extended shopping break' would look like. With those longer periods, I would factor in a reduction in rent per square metre too. Looked at this way, you can calculate three possible scenarios of a one off capital hit.

Next look at the debt servicing costs on that one off hit. Could a 'new order' HLG service that debt?

Now see what would happen to profitability in the 'new order' revenue picture , where revenue was only 80% of what it was before. How would the bottom line be affected?

You are right about the future being unknown. But that doesn't mean there is not sufficient information out there to make an educated guess as to what will happen. I suggest you get cracking....

SNOOPY

discl: Not an HLG shareholder. I will not be 'getting cracking' myself on this exercise, as I have a few shares which I do own that need some solid cracking first!

[Flugenbear]

Cheers Snoopy.
But I'm too busy trying to find toilet paper.
I just want a roll or 2.

[Snoopy]

Cheers Snoopy.
But I'm too busy trying to find toilet paper.
I just want a roll or 2.

Gee that was fast work Flugenbear. $2 it is then? Or did you mean 2c!

SNOOPY

[Flugenbear]

Gee that was fast work Flugenbear. $2 it is then? Or did you mean 2c!

SNOOPY

Yeah.....based on lack of toilet rolls and pasta, shutting down a country where it hasn't even put someone in ICU let alone killed them, I reckon fair value is about......
Can I answer tomorrow?
I'm going to pack n save and maybe I'll come home with a bog roll.
That could make all the difference.

[JeremyALD]

So if retail stores can't trade for a month how will it work? Do they get a full subsidy to cover the period, or will they make a big loss over that month? There's a clear lack of information.

[Beagle]

Fear.

In a situation like this, it is possible to imagine a future scenario as gloomy as you like and in your own mind it is real. I would suggest 'zooming out' and looking at the bigger picture. First reflect on the facts.

1/ HLG is right at the top of the retail class on stock turn, profit margin and store design. They have no term debt, even if some of those lease terms look onerous right now.
2/ HLG is a gold star tenant that lifts the appearance of any shopping precinct they are in.
3/ HLG sells stuff that everybody needs: clothes

Now consider that if retailing as we know it were to end, who would be the last to turn out the lights. HLG would be near the top of my guesses.

Now consider if the mall owners lose HLG, which other brands would have gone before them? Probably everyone else except the coffee shop. Do you really think the future of shopping centres is as a ghost mall with a coffee shop?

The 'new normal' will be different to what it was. There will be compromises to be made, in rents, in stock turn and maybe even in fashion. And yes shareholders on the 'retail end' and the 'building rental end' will see some pain.

However do you expect Jacinda to spend her next election campaign walking through empty shopping streets dressed in rags, like a cave woman, and handing out shekels to the former retail workers turned squatting beggars so that they can boil up a dessert spoon full of rice for dinner? Get real!

The new reality will be a compromise, but it won't be as calamitous as some here think. Fred Flintstone will be elected prime minister before some of these doomsday predictions for HLG on this forum come true.

SNOOPY

Good to see your Beagle nose working properly again Snoop dog. I reckon you are bang on the money. The way the mall owners shares are also being pummelled KPG about 50%, they will wear a lot of the pain from this. No way it sheets home all to the retailers otherwise they will have ghost malls with no tenants left !

I think Glassons will get through this in Australia too Winner. Sadly I think there could be even more pain ahead for the share price but it will find a floor eventually and in the long term HLG has the pedigree and the long term track record to bounce back well.

I can imagine the conversation with the property manager at KPG who own Lynmall, down the road from where I live. I'd love to be a fly on the wall when it goes down.
Look mate we've been here, both a Glassons and Hallensteins store for over 30 years and paid your rent on time every month right through the GFC and every other tough time we've encountered. We drive a lot of foot traffic to Lynmall. We live in unprecedented times. You need to cut us some slack here and work with us, we're all in this together. Do you really want to be the proud manager of a ghost mall ?

[Joshuatree]

Think id put JB Hi Fi, Supermarkets, Kmart, Farmers, Briscoes, Noel Leaming, Harvey Norman , other Womans clothing shops and anchor tenants up there ahead but get your point Snoops.
And hey we dont want everyone walking around naked ,do we? We need Hallys(at some price point).

[winner69]

I suppose that HLG can’t even do online selling if warehouse workers self isolating

[bull....]

Fear.

In a situation like this, it is possible to imagine a future scenario as gloomy as you like and in your own mind it is real. I would suggest 'zooming out' and looking at the bigger picture. First reflect on the facts.

1/ HLG is right at the top of the retail class on stock turn, profit margin and store design. They have no term debt, even if some of those lease terms look onerous right now.
2/ HLG is a gold star tenant that lifts the appearance of any shopping precinct they are in.
3/ HLG sells stuff that everybody needs: clothes

Now consider that if retailing as we know it were to end, who would be the last to turn out the lights. HLG would be near the top of my guesses.

Now consider if the mall owners lose HLG, which other brands would have gone before them? Probably everyone else except the coffee shop. Do you really think the future of shopping centres is as a ghost mall with a coffee shop?

The 'new normal' will be different to what it was. There will be compromises to be made, in rents, in stock turn and maybe even in fashion. And yes shareholders on the 'retail end' and the 'building rental end' will see some pain.

However do you expect Jacinda to spend her next election campaign walking through empty shopping streets dressed in rags, like a cave woman, and handing out shekels to the former retail workers turned squatting beggars so that they can boil up a dessert spoon full of rice for dinner? Get real!

The new reality will be a compromise, but it won't be as calamitous as some here think. Fred Flintstone will be elected prime minister before some of these doomsday predictions for HLG on this forum come true.

SNOOPY

Im afraid i dis - agree with some of your fine points and tend to agree with flugenbear more. Your trying to predict the unknown ( virus and lenght of time its here)
do you really believe they will solve this in 4 weeks.?
isnt hlg demographic the one to take the biggest job hit?
how high is cloths buying on your shopping list when your on the benefit?
are not malls in decline overseas as a means of people shopping , thats why mall owners are changing them to experiences so i doubt mall owners will care if a few shops close , there will be plenty to replace them in time. If supermarkets are any guide they are putting there prices up and gouging the consumer in a pandemic , can you believe it.

[ratkin]

Im afraid i dis - agree with some of your fine points and tend to agree with flugenbear more. Your trying to predict the unknown ( virus and lenght of time its here)
do you really believe they will solve this in 4 weeks.?
isnt hlg demographic the one to take the biggest job hit?
how high is cloths buying on your shopping list when your on the benefit?
are not malls in decline overseas as a means of people shopping , thats why mall owners are changing them to experiences so i doubt mall owners will care if a few shops close , there will be plenty to replace them in time. If supermarkets are any guide they are putting there prices up and gouging the consumer in a pandemic , can you believe it.

Will be charity shops full of clothes when this thing finishes. I buy most my clothes from charity shops, and they very popular, will be more so when this is over.