Michael Hill expects to increase first-half profit on higher sales and margins

Thursday, 10 December 2020

Michael Hill chief executive Daniel Bracken expects profit to rise in spite of the coronavirus pandemic.

Michael Hill International expects to lift its first-half profit in spite of the coronavirus pandemic as the jewellery chain benefits from higher sales at its existing stores and online, and boosts profit margins.

Same-store sales rose 7.9 per cent to A$220.9 million (NZ$233.9m) in the 22 weeks to November 29, while online sales surged 110 per cent, the company said. The figures exclude 15 stores which were permanently closed, as well as temporary store closures.

To counter the impact of Covid-19 on its physical stores, Michael Hill has boosted its online service, offering virtual consultations and trying on of jewellery. The company’s profit margin expanded about 200 basis points.

Despite the temporary store closures and lower foot traffic during the key Christmas trading period, Michael Hill expects its first-half pre-tax profit will materially exceed last year’s A$31.6m.

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Its forecast does not include the benefits it gained from wage subsidies and accounting changes related to leases.

The company received $2.26m in Covid-19 wage subsidy payments in New Zealand, and $1.33m in wage subsidy extensions. It also qualified for Australia’s JobKeeper scheme.

“Across all channels and segments, the company has delivered strong results for October and November, continuing on the solid growth in sales and margin from the first quarter,” said chief executive Daniel Bracken. “The company continues its unwavering focus on costs, and has worked diligently to deliver strong improvements in its cash and balance sheet position.”

While the jewellery chain has had a positive start to the 2021 financial year, concerns remained around further Covid-19 outbreaks, lower in-store foot traffic, and their potential impact on first half earnings, he said.

Michael Hill is monitoring the potential impact on trading conditions in Canada, where 14 of its stores are temporarily closed, and could remain closed through December, due to Covid-19 lockdowns.

In New Zealand, same-store sales rose 3.6 per cent to $47.5m. When including all stores, sales in New Zealand fell 1.1 per cent to $48.5m.

Shares in Michael Hill jumped 8.8 per cent to 62 cents shortly after the NZX opened at 10am. The stock has dropped 8.4 per cent this year.