Covid-19 hits Michael Hill bottom line as jewellery retailer focuses attention online

Wednesday, 19 August 2020

It was a “year of two halves” for Michael Hill.

Jewellery chain Michael Hill has reported a steep profit drop due to Covid-19.

Michael Hill International reported a profit of A$3.1 million (NZ$3.4m) for the 2020 year, down from A$16.5m last year.

Chief executive Daniel Bracken said it was a “year of two halves”.

Shops were closed for anything from five to 13 weeks in the second half of the financial year, depending on their location, as countries dealt with the pandemic.

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“Prior to the Covid-19 store closures at the end of March, the business was successfully delivering both sales and margin growth, and was tracking to achieve increased year-on-year [earnings],” Bracken said.

“While the Covid-19 closures had a severe impact on headline sales and profit, I was particularly proud of the determination, resilience, and agility of our team across the business through the shutdown and temporary closure periods.

“As we progressively reopened stores in all markets, we implemented robust safety protocols to protect both our team and customers, and I can confidently say that Michael Hill was best in class in this regard.”

In May, the company announced it would close stores across its global network in response to the changing retail environment caused by Covid-19.

Tauranga, Upper Hutt and Johnsonville outlets were closed in New Zealand.

Bracken said there had been a surge in the company’s online business, with a record $24.7m in digital sales in the full year, up 54.7 per cent from the year before. Digital sales now represent 5 per cent of total sales.

In New Zealand, adjusted same store sales increased by 2.4 per cent to $103.9m and all store revenue declined by 11.1 per cent to $106.7m for the year. Gross margin for the year was 59.6 per cent.

“As we complete what can only be described as an extraordinary year, we have emerged as a stronger, leaner and more professional business. The strategic progress we have made across loyalty, digital, retail fundamentals and company culture, have Michael Hill well positioned to navigate both the opportunities, and the potential market disruptions ahead,” Bracken said.

During the year, expanded its offering with direct selling from social media platforms and digital catalogues and virtual selling.

Its Brilliance loyalty programme now has more than 200,000 members globally.