Shoppers seeking bling during Covid-19 lift Michael Hill sales, profits

Wednesday, 14 October 2020

Michael Hill chief executive Daniel Bracken, pictured with the company’s founder Sir Michael Hill, says he is pleased with first quarter sales.

Consumer demand for bling has boosted jewellery retailer Michael Hill’s online sales during the Covid-19 pandemic when many of its bricks and mortar stores were closed.

Chief executive Daniel Bracken said the retailer’s profit margin lifted between 100 and 200 basis points in the 13 weeks to September 27, compared with the same period a year earlier as online sales jumped 129 per cent. He didn’t disclose the profit margin.

Founded by its namesake in Whangarei in 1979, Michael Hill also operates in Australia and Canada. Some 44 of the 289 stores across the group were temporarily closed during the first quarter of its financial year due to Covid-19, while another 15 were shut due to underperformance since the year earlier period. That caused total sales to drop 3.6 per cent.

On a like-for-like basis, group sales increased 7.3 per cent to A$116.7 million (NZ$126m). Within that, New Zealand sales rose 4.7 per cent to $24.4m, Australian sales jumped 12.5 per cent to A$64.2m, while Canadian sales advanced 5.9 per cent to C$28.2m (NZ$32.2m).

* Michael Hill flags more store closures

* 'Crisis creates opportunity': Michael Hill flags virus pivot despite sales plunge

Forsyth Barr analyst Guy Hooper said: “Consumer sentiment has been fairly strong coming out of lockdown, and Michael Hill, like most retailers, has benefited from that.”

'The sales are fairly impressive given the backdrop of temporary store closures and also in the context of a reduction in store numbers as well.

“Online sales growth has been strong, supported by the fact that stores were closed which drove a lot of people online. That has remained elevated even as store doors have reopened.”

Michael Hill expects to continue to be impacted by the Covid-19 pandemic, affecting its physical stores. To counter that, the company has improved its online offering with virtual selling and try-ons.

Hooper said the virtual jewellery consultations created a more interactive online experience for shoppers and likely gave people more confidence to shop online in a category that typically had lower online penetration.

Online sales now made up 5.3 per cent of Michael Hill’s total sales.

The company also benefited from increased uptake of its loyalty programme, where membership jumped 81 per cent to more than 260,000 since the end of June, and higher sales of its exclusive branded collections to 43.3 per cent of total sales, up from 37.9 per cent a year earlier.

Hooper said he had become more positive on the outlook for consumer spending heading into Christmas, underpinned by economic sentiment, a buoyant housing market and a reallocation of travel spending. Still, he said there was heightened uncertainty further out.

“At least for the immediate outlook, the backdrop appears fairly positive for Michael Hill, but it’s hard to have a strong view beyond that,” he said.

Michael Hill shares rose 6.7 per cent in afternoon trading on Wednesday to 47.5 cents.