The Hour Glass

[WolfT]

My source says that now the sales have dip because china tourist are not buying...

[Temperament]

some special Patek Philippe models are subject to the approval of Patek Philippe's senior management on the name/background of the prospective buyers. This may sound crazy but it is

true.

i think the main reason is Patek Philippe must protect their BRAND NAME for life.
If any "newly multi-millionaire" (money laundering?) can buy, then where is the "Exclusivity"? Where is the High Society Image? Where...?
Hmmm... Ang Moh really very smart here.

[dydx]

Now that THG's first 2 Ladurée outlets located in Takashimaya Shopping Centre.....
http://www.thehourglass.com/?p=2958
are properly established and seem to continue to enjoy a steady flow of business from locals and tourists alike after 7 weeks of continuous operation, would it be quite fair to assume that these 2 outlets would each add say $1.0m in incremental PBT a year to THG's group P&L?

A relevant question: Would THG add more Ladurée outlets including in other gateway cities in Asia?

[Wildreamz]

A relevant question: Would THG add more Ladurée outlets including in other gateway cities in Asia?

I don't see why not. Strategic expansion to other parts of Asia has always been their strategy (iirc).

I see Laduree as a good business, with good brand recognition and good franchise potential.

Too bad it doesn't have much, if any accruable factor with their core business.

(not vested)

[d.o.g.]

Now that THG's first 2 Ladurée outlets located in Takashimaya Shopping Centre.....
http://www.thehourglass.com/?p=2958
are properly established and seem to continue to enjoy a steady flow of business from locals and tourists alike after 7 weeks of continuous operation, would it be quite fair to assume that these 2 outlets would each add say $1.0m in incremental PBT a year to THG's group P&L?

Just run the numbers and it will be obvious whether the outlets make any money.

Look at the outlet location and size (to get an idea of the rent), look at the staffing (for labor cost), look at the price and the average purchase volume to estimate sales proceeds. Estimate raw material costs (go to a gourmet baking supply shop to check prices, look up recipes for proportions), subtract the relevant costs, and you'll have a good idea whether the outlets are making money at the EBITDA level.

As a gut check however $1m in PBT from 2 outlets seems a bit high. Everyone would enter the fancy cookie business if it was that profitable.

I would also counsel that 7 weeks is too short to figure out if something is sustainable. The fancy doughnut bubble lasted maybe a year before bursting. For months people were queueing for 1 hour or more to buy from Donut Factory. Today they run special offers - with very few takers. Breadtalk also tried with J Co and gave up. Other past food fads include Portguese egg tarts and bubble tea. The more recent ones are soybean curd and Chinese herbal soup (apple/pork rib, pig stomach/gingko nuts etc).

As usual, YMMV.

[sgd]

not sure of ck tang dept store still owns the franchise for crabtree and evelyn.

Want to see if cookies can do well can first go look at C&E

http://www.crabtree-evelyn.com.sg/food_biscuits.html

[dydx]

Are the Ladurée macarons and luxury cakes/pastries .....
http://www.laduree.fr/
http://en.wikipedia.org/wiki/Ladur%C3%A9e
going to be more long-lasting than the local Donut Factory and J Co donuts, the Portguese egg tarts, or the Taiwanese bubble tea?

I believe so because the Ladurée brand and products are based on a deep French food culture that has a 150 years' history now, and the present owners - the Holder Family - are smart people with a 20-year track record owning, leading, running and growing the business. And we must not forget, the Tay's and Chan's now running THG are quite smart businessmen with a solid track record as well. Besides, the present 2 local Ladurée outlets are quite simple retail operation, something THG has lots of expertise and experience.

[dzwm87]

IMO, I don't think the exclusive distributorship for Laudree macarons will be a significant game changer - neither for the better nor the worse. In Dec 2012, Laudree opened its first outlet in HK and a box of 15 assorted macarons cost around HK$345 or S$57.50 - which implies S$3.80 per macaron. I don't think there will be much price difference between HK and Singapore so it's safe to assume this selling price range.

Now, to see the "impact" of Laudree distributorship - assume the exclusive distribution aims to match the recent 7% sales decline in 3Q2012 which amounts to around S$11mln. To plug in this SS$11mln gap, the two new outlet has to sell around 2.9mln macarons or 190K boxes of 15 assorted macarons. In other words, these 2 outlets have to sell around 2000 boxes a day or 1000 boxes per outlet. Maybe in a blue sky scenario, the novelty effect can meet such target but to run it off consistently for 90 days/1 quarter will be doubtful.

No doubt, moving into Laudree may improve its CCC days - depending on their target mix. A/R days will be low given its CoD terms while I can't forsee selling macaron having a larger inventory days than selling watches. A/P days should be the norm or even better since it is an exclusive distributorship. Margins are likely to match what HG is earning so there is a high possibility it can be accretive though this depends on how much mix will macaron account for HG's total sales. But overall, my point is this, one sale of a cheap Patek Philippe watch at S$10K can cover the effort of selling Laudree macarons. So their impact won't be much.

S$1mln PBT is too much.

Assuming an arbitrary but somewhat reasonable 10% PBT margin, a PBT of S$1mln will imply revenue from Laduree alone of around S$10mln which will be somewhat close to the scenario in my previous posting.

Really, the concern for HrGlass shouldn't be about its macaron business - this segment won't move the needle by too much.

[psolhawk]

The French boss has already mentioned that a cafe will only be setup if he is reasonably satisfied with the queues for their macarons in Singapore. I believe this is an imminent possibility, and comes with it the usual associated risks such as labor costs, rentals, etcetra. We should get a clearer pic from the agm perhaps.

[dydx]

THG's Ladurée retail business - now comprising only 2 Ladurée outlets in Takashimaya Shopping Centre, with the possibility of more outlets to be added over time including in other gateway cities in Asia - will remain a sideshow, when compared with the core and well-established regional watch distribution/retail business. But it should be a profitable business, because of its expected high GP Margin, and the well-defined and managed recurrent operating costs (mainly air-freight, retail rental and staff costs), with the actual longer-term sustainable month-to-month profitability of the business moderated by the usual seasonal factors (e.g. Christmas and other festive seasons, Valentines' Day, Mother's and Father's Day, etc.)