The Hour Glass

As a long-term investor and shareholder of THG, I have learned to believe - perhaps a little too simplistically - in the long and proven track record of, as well as the cues from, the company's senior management and controlling shareholders, now comprising 3 wise, experienced and driven men and a fine lady.

As in the latest result announcement (p9) the THG's BOD has clearly stated that, and I quote: "Inventory increased by $41.7 million in preparation for the retail network expansion.".....
http://info.sgx.com/webcoranncatth.nsf/V...penelement
and in Dr Henry Tay's (as THG's Executive Chairman) Chairman Statement in the latest AR (p13 to p17; especially under the section with the heading "A New Roadmap" in p15 and p16) he has clearly described that THG will be opening 2 new stores in Singapore (the "More Passion by The Hour Glass" at Paragon, in Sep12) and Hong Kong (in the Landmark in Central, by Nov12), and relocating the existing store in Gold Coast, Australia, to the prime retail centre of Edward St, Brisbane.....
http://info.sgx.com/listprosp.nsf/07aed3...b003833aa/$FILE/THG_AR2012_25%20June.pdf
, I think it would be rather silly for me - or anyone with a rational mind - to start doubting that the entire business may be going wrong, just because of a higher inventory number as at 30Jun12.

I think we should also bear in mind that as Swiss machanical watches are hand-made, it is a proven fact that most of their OEMs or principals have a habit of raising selling prices every year to cover at least normal increase in manufacturing and R&D costs. This simply means that it makes sense for THG to buy or order the additional watch inventory required for the 2 new stores ahead of time.

After reading Dr Henry Tay's latest Chairman Statement again, it becomes even clearer to me that thinking short-term for this very fine company is almost certainly the wrong way to bet!

personally, I feel that the inventory is a bit out of control. The success of The Hour Glass also builds on its good management of inventory in the last few years.

(15-08-2012, 09:41 AM)freedom Wrote: personally, I feel that the inventory is a bit out of control. The success of The Hour Glass also builds on its good management of inventory in the last few years.

When a customer walks in and wishes to purchase dozens of watches, you must have stock on hand to satisfy his demand. Otherwise, his business will go to Cortina

(15-08-2012, 09:51 AM)propertyinvestor Wrote:

(15-08-2012, 09:41 AM)freedom Wrote: personally, I feel that the inventory is a bit out of control. The success of The Hour Glass also builds on its good management of inventory in the last few years.

When a customer walks in and wishes to purchase dozens of watches, you must have stock on hand to satisfy his demand. Otherwise, his business will go to Cortina

good inventory management = no inventory? I have nothing to say any more.

IMO, the inventory increases from average of 180 days to 236 days in one quarter (as highlighted by d.o.g), should warrant a concern, but should not be overly concern.

If the inventory continue to worsen in the following quarters, then it should be a real concern.

The reason for a temporary raise of inventory might not be a bad thing, if there is a real reason for it i.e. prepare for anticipated increase of demand.

(not vested)

the fact is that the revenue does not warrant an increase of demand, so is the outlook.

(15-08-2012, 10:10 AM)freedom Wrote: the fact is that the revenue does not warrant an increase of demand, so is the outlook.

I would like to quota dydx posting yesterday

"As in the latest result announcement (p9) the THG's BOD has clearly stated that, and I quote: "Inventory increased by $41.7 million in preparation for the retail network expansion."

So the outlook look promising, although it is yet to be proven.

Does anyone have a breakdown of those inventory?
If majority are rolex, AP,Panerai and PP then no worries!
Because these watches increase their selling price almost yearly.
As long as inflation remain high, it will be good to stock up more!

(15-08-2012, 09:53 AM)freedom Wrote:

(15-08-2012, 09:51 AM)propertyinvestor Wrote:

(15-08-2012, 09:41 AM)freedom Wrote: personally, I feel that the inventory is a bit out of control. The success of The Hour Glass also builds on its good management of inventory in the last few years.

When a customer walks in and wishes to purchase dozens of watches, you must have stock on hand to satisfy his demand. Otherwise, his business will go to Cortina

good inventory management = no inventory? I have nothing to say any more.

For those who remember Sincere Watch when they were listed in Singapore years ago - Sincere also keep very substantial stocks just like many other retailers, but somehow they managed to get credit from the swiss suppliers. As the result, they have pretty good ROE.

(15-08-2012, 10:15 AM)CityFarmer Wrote:

(15-08-2012, 10:10 AM)freedom Wrote: the fact is that the revenue does not warrant an increase of demand, so is the outlook.

I would like to quota dydx posting yesterday

"As in the latest result announcement (p9) the THG's BOD has clearly stated that, and I quote: "Inventory increased by $41.7 million in preparation for the retail network expansion."

So the outlook look promising, although it is yet to be proven.

check the part of commentary about outlook in financial report for Q1 2013.

Quote:Continued global economic uncertainty is expected to impact consumer sentiment. Demand for luxury watches will be affected.

I don't see any promising outlook even from the management.