H&t Share Discussion Threads

[lord loads of lolly] 01/12/2024 14:05

Jm6783 - smaller outfits probably survive by making less than 12% ROE.

Whilst H&T have set the mid teens ROCE as an objective, that would be high for retail. There isn’t simply a magic number which ALL businesses ought to be able to achieve. It depends largely on which sector you’re in, as this AMEX article makes clear, saying it’s typically between 5 & 15% for retail:

www.americanexpress.com/en-gb/business/trends-and-insights/articles/return-on-capital-employed-meaning/#:~:text=A%20rule%20of%20thumb%20is,from%205%25%20to%2015%25

I’ve said repeatedly there’s room for improvement with H&T. But unlike you, I also think there’s a fair bit to like.

If you don’t, why stay invested?

Or if you’re no longer invested here, why spend time posting negatively on a company where you’ve no skin in the game? Doesn’t make sense.

[pugugly] 01/12/2024 11:24

Possible thought - Very much the expertise of your area LOL

Backdoor Leakage? Depends very much on stock control and internal security. My direct experience was many moons ago but in those days very easy to slip a high value item into pocket and loss never tacked to an individual employee or could have been a customer.

[jm6783] 01/12/2024 11:12

Thanks Taylor20 for your reply.

LLOL, that is fine and may well be true. But again, if this is a scale business and HAT is by far the market leader, then if HAT is running itself relatively efficiently - as you seem to be claiming - and is only hitting 11-12% RoE with 280 stores, then how are pawnbrokers with 5-10 stores making ends meet?

[taylor20] 01/12/2024 10:45

Obviously the NI & Minimum wage changes will hit H&T quite hard, but I don't think that H&T will be impacted as much as other pure retailers, for example CARD factory has 1000 stores and 10,000 staff, so assuming 3 staff require full time per store and 51 hours per week (3 * 51 * 1000 hours of cover)/10,000 staff, that is only 15 hours per employee on average. Clearly most of the staff were below the NI threshold, so has gone from paying no NI to paying quite a lot and has little room to manoeuvre.

[lord loads of lolly] 30/11/2024 23:04

jm6783 - if, on average, stores are open 8 hours a day, 6 days a week (with a few also trialling Sunday opening), they’re obviously going to average more than 3 staff members per store to cover the hours.

That’s even before you take into account all the Head Office roles in essential areas including Buying, Marketing, Merchandising, Finance, Property, Legal, Area Management etc. etc.

As I said before (& you kindly confirmed), your first hand experience of working in retail is clearly non-existent.

[jm6783] 27/11/2024 21:11

You might need a minimum of 3 staff. However, the firm employs over 1400 staff and has around 280 stores. Do they then employ too many people outside of the stores ?

[kickingking] 25/11/2024 23:31

Most stores only have three staff. When you are in the business dealing with gold, any less would be disaster and dangerous for the staff

[jm6783] 25/11/2024 18:31

Thanks LLOL. That is good to know. No, I have never worked in retail … nor management consulting ;)

[lord loads of lolly] 25/11/2024 17:43

Jm6783 - not sure if you've ever worked in retail?

I have. Still do in fact (online). And your comment about redeploying staff sounds like the sort of thing management consultants would trot out.

Sounds sensible in theory. Until you realise that a) the majority of existing stores may not actually be overstaffed. If you trawl the staff reviews on Glass Door, that's certainly the general consensus there. Also, relatively few would probably be willing - or able - to drop everything & relocate.

I suspect efficiencies are far more likely to be derived from increasingly sophisticated use of IT to up-, cross- & repeat-sell. And from analysing sales trends in their jewellery & watches to finesse the mix & maximise price potential.

[jm6783] 23/11/2024 10:31

No store staff need to get trimmed, in my opinion. If they are going to open 15-20 stores per year, they should use current staff for the expansion rather than hiring, thereby making themselves more efficient and giving opportunities to current staff.

One way of looking at this is that if this is a scale business, then how can they - as the clear market leader with 300 stores - only be making 12% RoE if they are in any way efficient ?

[saint or sinner?] 23/11/2024 09:26

Hard not to be sceptical when the boards track record shows barely adequate performance during optimal times. I'm sure the shop staff (probably on minimum wage) go above and beyond and deserve every penny they get each year.
Any suggestion that a few of them get trimmed in an attempt to marginally boost profitability (blaming it on the governments requirement to raise NI to fund devastated Public Services) is in my mind completely abhorrent.

[lord loads of lolly] 22/11/2024 22:43

Sure, but some of their main fixed - or largely fixed - costs (e.g. salaries & energy) have increased rapidly since 2021 due to external pressures (war/wage legislation), over which H&T has no control.

If costs had proportionately significantly outpaced revenue growth, there’d be far more legitimate cause for concern. But they haven’t.

That said, I agree there’s still room for improvement. Hopefully Jan 2025’s TU will start to deliver on that, though the current share price suggests there are plenty of sceptics out there still. I don’t count myself amongst them. You?

[jm6783] 21/11/2024 19:18

LLOL, with a lot of fairly fixed costs, this company should have strongly positive operating leverage - meaning its operating income should increase at a much faster pace than its turnover. It has not - hence my concerns and disappointment around operating efficiency.

The other thing you fail to mention when looking only at profits is that they did a rights issue in 2022, which increased the number of shares by around 10%. So, the increase in profits has been split over a higher number of shares, meaning EPS has also been negatively impacted by that.

Again, I am hoping beyond hope for better things going forward.

[lord loads of lolly] 21/11/2024 16:54

jm6783 - you only ever seem to see the negatives here.

Over the past 2 years, HAT has increased revenues from £122m (FY 2021) to £220.78m (FY 2023), with a corresponding increase in operating income.

I agree they haven't hit their "mid-teens" RoE target yet. Nor have they set a timescale for achieving it. But it's far from all bad.

[jm6783] 21/11/2024 13:30

Unfortunately, for the past 2 years, they have consistently guided the market down and missed earnings expectations despite a near perfect backdrop of record high gold prices and a continuing cost of living crisis. Yes, there have been steep wage increases over that time, but you would have thought they would have found ways to become more efficient than they have. Overall, it has been disappointing and management need to work really hard to hit their ‘mid-teensR17; RoE target any time soon.

[saint or sinner?] 21/11/2024 08:02

The most highly paid senior staff - those with their noses in the trough doing the least work?

[riverman77] 20/11/2024 15:34

Yes but if the minimum wage rises (eg for the most junior staff) then the next levels up will also expect a rise to maintain the differential. You'll therefore see a knock on effect across all wage brackets (perhaps with the exception of the most highly paid senior staff)

[lord loads of lolly] 20/11/2024 15:28

boonkoh - I agree few if any staff would be on minimum wage.

But the Directors have previously said increases to minimum wage also have an impact higher up the food chain, as you have to remain competitive given the responsibility of the roles.

That said, I find it odd that sentiment is so downbeat here and can only think investors are being cautious, given what happened on the retail side last Christmas. My (slightly contrarian) view is that things continue to remain tough for many and companies like H&T should actually benefit from this. And whilst the gold price has come off its October highs, it remains strong which is also a tailwind.

[boonkoh] 20/11/2024 14:26

At least better than most retail/hospitality businesses. I presume very few employees in minimum wage and part time, given the expertise needed to value items, negotiate amount, handle cash, regulatory procedures, and dealing with difficult customers.But this share is just in such a strong downtrend atm... Won't be surprised if it gets to 320-330p in the next month or so. Cheap can always get cheaper.

[lord loads of lolly] 15/11/2024 09:24

Jm6783 - I agree staff levels will have to be managed carefully. And any planned new stores may have to be re-examined, given the increase in NI.

But where’s your evidence that "the recent investment in IT systems (hasn't) made them more efficient"? Firstly, investment paybacks nearly always take time. Secondly, both H&T’s revenues & profits have consistently increased since 2022. So I don't think you can fairly assess how successful their IT upgrades have been yet.

Buybacks &/or Director buys would be a welcome development. I lobbied for the latter via a question at the last webinar and will be keeping up the pressure there. They need to put their money where their mouth is. And arguing that Directors' personal circumstances may not allow for any significant holdings simply won't wash with me.

[jm6783] 14/11/2024 21:08

They will need to manage staff levels more carefully, in my opinion. If they are opening more shops, can they try to run these with fewer staff per shop ? And why has all the recent investment in IT systems not made them more efficient?

And beyond that, I would argue they should consider buying back shares at current levels. They have the borrowing capacity to do it and appear to have lower pledge book demand than was previously assumed.

[riverman77] 14/11/2024 20:13

Surely the rise in the minimum wage is going to hit them - not sure how much scope they have to increase lending rates to offset.

[jm6783] 14/11/2024 19:00

Really regretting not having sold these. Well below the 425p rights issue level 2 years ago - itself a discount to the share price at the time. And trading at 87% of book value. Time for some management action, me thinks

[lord loads of lolly] 31/10/2024 09:22

wad collector - Some AIM shares had also fallen further than H&T pre-budget.

Mid January will be the real test here. If FY results are in line or above expectations, happy days & prepare for an upwards re-rate.

Conversely, if we get another underwhelming Christmas retail performance, it'll be hard hats all round.

At least the current strong gold price won't be doing us any harm.

[wad collector] 30/10/2024 20:51

Not bouncing as high as some other AIM shares on today's budget news.