Michael Hill bets on Miranda Kerr to turn around business

Sunday, 17 November 2024

Bringing on an internationally recognised model has worked wonders - and just as hoped - for home-grown jewellery company Michael Hill.

The publicly listed trans-Tasman business, which operates 270 stores across New Zealand, Australia and Canada, is seeing early signs of improvement in its jewellery sales as it enters its all important quarter of Christmas trade.

Australian-born Miranda Kerr, a former Victoria’s Secret Angel and founder of skincare brand Kora Organics, was appointed global ambassador for Michael Hill in April.

She has become the face of the brand as it repositions itself as a premium jeweller, starring in company billboards, adverts and social media posts.

Getting Kerr on board as the face of Michael Hill was a two-year process, and a move that has proven lucrative for the multi-brand jewellery retailer, which earlier this year embarked on a rebrand.

Michael Hill’s average transaction value has lifted by 30% to 40%, as have visitor numbers to stores and the website.

As managing director and chief executive Daniel Bracken puts it, the company has modernised its brands, while Kerr is helping to modernise its customer.

The company is “thrilled” by the partnership with Kerr and its early results.

“Miranda was someone that we always had on our list, but we weren't sure of her interest in us. The more we talked, we found there was an incredible amount of synergies: growing up in Australia, she went to school in Brisbane; where our head office is, and she has a really strong passion for sustainability, which has been one of our big areas of focus over the last couple of years … It was a good alignment for her, for our business, and with the Antipodean connection, all of those things worked well together for her to be connected to our brand and us connected to her. She's really enjoying the relationship, as are we,” Bracken told the Star-Times.

“When brands have an ambassador partnership, it's often about changing people's perception of your brand, and definitely she's helped attract that new, more fashion-focused customer to our business. As we've modernised our brands, she's helping us modernise our customer.”

Kerr’s role could extend beyond an ambassadorship and move towards playing a part in developing ranges and what products end up on shelves.

All Michael Hill stores will be getting a face lift to reflect the new “elevated” brand and logos. The first to debut the new look and format is in Queenstown.

But it will take time and each store will be reworked as store leases and refurbishments come up for renewal, says Bracken.

Michael Hill operates 45 stores in New Zealand. It recently opened a new look store in Auckland Airport’s new Mānawa Bay outlet shopping centre.

Updating the entire store network is a significant investment, and comes as part of efforts to lift spending, and for the store experience to complement a new higher quality range of products the company has been developing for more than three years.

Its strategy since 2020 has been about elevating the Michael Hill brand to a more “aspirational position” in the market, says Bracken. That means appealing to a higher-end customer.

“You can't just suddenly decide, ‘Today we're an aspirational brand’, and therefore we're going to behave differently, you have to prove yourself to the market.

“We've spent three or four years now, tweaking, adjusting, and constantly changing lots and lots of things in our business to make it a better business, to make it a better brand. A lot of this was more important in Australia and Canada than in New Zealand, because in New Zealand we've always been perceived as a more premium brand,” says Brisbane-based Bracken.

“A lot of what we've been doing has been trying to bring the rest of the world up to the standards of how we're perceived in the New Zealand market.”

Michael Hill has a much higher share of the jewellery market in New Zealand compared with its other markets, mostly due to less competition here.

The retailer opened an ultra-high end Australian flagship store in Chadstone, Melbourne in April, a store which Bracken says is now its top-performing store in Australia and encapsulates the new modern approach of the company.

“We always said we're not going to have 300 stores that look like this, we can’t afford 300 stores that look like this. Strategically, around the world, we will have five to 10 of these over the next few years.

“The Australian one was the first, and we're still working on, where our true flagship would be in New Zealand. We've got one lined up for Canada middle of next year, but we want one in New Zealand next year as well.

“But we’ve also said, from this day forward, any store we refurbish or update has to have elements of what we call this store of the future; elements of Chadstone embedded into any store that we do.”

Michael Hill is yet to find the perfect location for a New Zealand flagship, but it will likely be in Auckland, says Bracken.

“We're prioritising redoing the most important stores first, and as stores come up, they will all be in the generation seen in Mānawa Bay and Queenstown. Over the next two to three years, we'd like to think that we'll get 50% of our stores to this new standard.”

In Queenstown this week, the retailer unveiled its new modern look for the first time in New Zealand, opening what it calls a boutique of the future, in the same new branding and design flavour of the Chadstone flagship.

At 90sqm, the Queenstown store is a fraction of the size, but it has the same distinct elevated style. There’s private selling spaces, a build-a-pendant jewellery bar, fresh product placement that makes it easier to browse, and the same curvature features, green branding and natural material hues throughout in a nod to the New Zealand heritage of the brand.

Company chair Rob Fyfe says Michael Hill is feeling optimistic about improved trading and over the last three to four months had been seeing “early signs of green shoots” of recovery.

“In business, when times are tough out there, that's the time when you want to be making the investments and refining your model, figuring out how can we make our business work better, so that when you come out the other side you can power away. We've been working really hard behind the scenes for 18 months, and all the way through Covid, to get ourselves in a position so when the market recovers we’re in a strong place,” Fyfe says.

“Jewellery is a very emotional purchase decision. It's about the look, the feel, the emotional connection with brand. [All this change] is about making sure we stay true to our roots and our heritage, as well as being contemporary, looking forward and evolving with the needs and trends of fashion. There's a lot of moving parts here. The stores are obviously the most visual piece, but a lot of work has gone into the product range.”

Whangārei beginnings

Michael Hill was founded in 1979 in the Northland town of Whangārei by New Zealanders Michael and Christine Hill. The chain started as a single high street shop focused on bringing an emporium of jewellery to the market, back when jewellery stores were independent family-run operations that sold a mismatch of everything from necklaces through to prize cups for soccer teams and silver platters.

Hill had seen jewellery stores with a large array of jewellery pieces, doing it differently in Asia and Hong Kong, and wanted to make jewellery more accessible in New Zealand. Michael Hill expanded into a chain retailer, multiplying its locations quickly.

It took the business to Australia eight years later in 1987, the same year it listed on the New Zealand Stock Exchange, and expanded into Canada in 2002. It listed on the Australian Securities Exchange in 2016.

The Hills are still involved in the business, which now has its headquarters in Brisbane. Sir Michael is founder-president and a non-executive director. His daughter Emma Hill has been on the company’s board since 2007.

The share price of Michael Hill has been on an Antipodean adventure of its own in that time, moving through peaks and troughs, today trading at the lower end of what it once has, at around 61 cents a piece.

Fyfe says he believes the company’s share price performance is ripe for recovery as sales continue to pick up and the business recovers over the next 12 to 18 months.

He says the recovery until now was in part in thanks to Miranda Kerr, who is “providing way more value than we expected”.

New brands and chains

Michael Hill launched TenSevenSeven ‒ a new high end brand ‒ in 2023 and has made progress with the acquisition of its low cost offering, Bevilles. The group plans to grow the Bevilles network to 100 stores in Australia, and will begin rolling out TenSevenSeven stores within the next 12 to 18 months.

The “elevation” of the Michael Hill brand and growing the Bevilles business are the two major focuses for the company right now, says Bracken.

“Those two things need to run together, but separately for the greater good.”

In the year to June 30, Michael Hill grew its revenue by 4% to $644.9m. However, it posted an after-tax loss of $479m, compared with a $35m profit a year earlier.

Its latest trading update shows the group’s performance has improved in the current financial year. Although sales have been weak, the group says Michael Hill was performing better than the overall jewellery market.

Group same store sales were up 4% in the first 16 weeks of the 2025 financial year, with same store sales for Australia up 6.3% and 4.7% in Canada. Sales were down down 4.2% in New Zealand, but Bracken says the business is back in growth.

“It's been a tough couple of years. We had an amazing 2020, 2021 and 2022, 2023 got tougher and 2024 was a tough year for us, so we're really happy to see the business back into growth - that's mainly been powered by Australia and Canada. New Zealand has been a more difficult retail market generally, but we are encouraged by improving results that we've seen in New Zealand,” he says.

“It's all about Christmas now. We've got our product right and a great campaign. Our stores look amazing, and we're looking forward to a strong and healthy Christmas.”

Aimee Shaw travelled to Queenstown courtesy of Michael Hill.