Michael Hill margins shrink in Australia amid discounting

Monday 12th October 2009

Michael Hill International said margins contracted in Australia, the jeweller’s biggest market, amid discounting to maintain sales growth.

Same-store sales in Australia, which makes up 68% of the retailer’s revenue, climbed 2.3% to A$44.7 million in the three months ended September 30, the company said in a statement today. Sales growth was 4.1% in kiwi dollar terms. Michael Hill’s shares gained 1.4% to 72 cents and have soared 39% this year.

Total sales for the company rose 6.3% to $84.6 million while sales open at least 12 months slipped 0.4% to $77.2 million, mainly reflecting a decline in revenue from Canada.

“North America continues to be challenging, with Canada struggling for most of the quarter,” chairman Michael Hill said in the statement. “The ongoing US economic conditions have also dampened consumer confidence in Canada. We are not expecting this will materially improve in the next quarter."

In New Zealand, Michael Hill’s margins fell on increased promotions and a pick-up in customers buying on credit. Same-store sale rose 0.6% to $17.2 millionIn the US, where the company acquired stores from a failed jewellery chain, the clearance of the Whitehall's merchandise was almost complete and margins are now improving, Hill said.

"Reaching levels of revenue sufficient to be profitable is still some way off and not expected in the short-term," he said.

Businesswire.co.nz

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