‘Slow grind’: Michael Hill launches strategic review of NZ business

Monday, 24 February 2025

An internal strategic review of the New Zealand business is under way as the jewellery chain navigates the economic downturn.

The cost of gold, rent and labour and sluggish consumer spending have led to “aggressive” trading conditions for jewellery retailer Michael Hill, particularly in New Zealand where it's conducting an internal review to weigh up profitability in the region.

Managing director Daniel Bracken said “prevailing macroeconomic pressures” were still impacting consumer spending and sentiment in 2024 “with conditions in New Zealand remaining particularly challenging”.

NZX-listed Michael Hill increased its profit 9.5% to A$16.9 million (NZ$18.7 million) in the half year to December 29. That was despite revenue dipping 0.7% to A$360m in the same period.

“Sales for the half reflected strong business performance in the first three months, which was offset by a more challenging result in the second quarter as we cycled record prior year sales in both October and November,” Bracken said in the announcement.

“An internal strategic review of our New Zealand segment is underway as we navigate the cyclical downturn in the economy, leverage the brand’s heritage and re-establish the profitability of this segment,” he said.

The company’s share price was up 1 cent after the announcement, trading at 55c on the NZX. No half-year dividend would be paid to shareholders.

NZ lagging behind Australia and Canada

Michael Hill managing director Daniel Bracken did not front up to investors but said in an NZX announcement that the company was focusing on an internal review of its NZ arm.

Bracken did not front up on a call to investors or media following the announcement but chief financial officer Andrew Lowe said the review of the New Zealand business came after a “challenging two years”.

Aotearoa was the only region where same-store sales declined in the half-year, down 7.8% on December 2023 due to low consumer confidence, declining foot traffic and the slower return of international shoppers.

“We acknowledge the economic conditions in New Zealand hasn’t been a quick cycle … it’s a slow recovery grind,” Lowe said. “A lot of New Zealand retailers would like to think they’ve traded through the trough and are coming out of it.

“We want to make sure we’re well-positioned to capitalise on that when we come out.”

Despite that, Lowe said the company was pleased with New Zealand’s trading result in the first seven weeks of the second half of the financial year, which was 1.9% lower than the same period last year.

Same store sales in Canada were up 6.7% and 3.8% in Australia.

Lowe said sales between October and November and the start of 2025 had a record uptick.

He said last week’s interest official rate cut in Australia and ongoing rate cuts in New Zealand would free up more discretionary spending for better “green shoots recovery in New Zealand”.

Michael Hill's new look store in Queenstown opened in the first half of the 2025 year.

Meanwhile, Canada continued its run of three record years in a row, he said. “Our expected recovery in the next 12 months depends on how quickly things come back.”

Same-store sales revenue in New Zealand was down 7.4% to NZ$60.5m. Same-store sales in Canada were up 2.7% with revenue up 2.4% despite two store closures. Bracken said it was “yet another record performance, especially considering continuing challenges in the local economy, and indicates the business is taking market share”.

Despite five closures , Australia revenue was up 1.2% with same-store sales up 0.6%.

Cost reductions

The group closed the first half of the year with 294 stores, down from 302 in the previous period, but included its second global flagship store in Bourke St, Melbourne.

Bracken said the company would reduce costs by about A$5m in the second half of the year.

Lowe did not say if more jobs were on the line as part of the cost reduction programme but said previous labour and structural changes would start to take effect in the next few months.

He said the company would focus on “in-store labour efficiency” including more ”effectiveness of rostering”.

Lowe said dealing with landlords was a particular concern with the company facing multiple international lease renewals. “You would think landlords would be more supportive and encouraging, but that’s not necessarily the case.”

While New Zealand had the lowest rent for the business, landlords were still trying to manage their profit margins as rents ticked up across all regions.

“We have about 100 landlords across the world. It’s very challenging for every retailer renewing at the moment,” Lowe said.