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Michael Hill shares fall as trans-Tasman sales shrink

Wednesday 10th April 2019

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Michael Hill International shares fell 5.7 percent after the jewellery chain reported weaker sales in its core Australian and New Zealand markets in the first three months of 2019.

Total sales fell 0.8 percent to A$117.6 million in the March quarter, and were down 1.5 percent on a same-store basis. That was due to a 3.2 percent decline in Australian sales to A$61.9 million and a 6.3 percent fall in New Zealand sales to NZ$24.7 million. Canada was the highlight for the retailer, with sales up 2.5 percent at C$26.2 million. 

Michael Hill said the decline was an improvement on the September and December quarters, when same-store sales were down 11 percent and 2.9 percent. Gross margin was 62.1 percent through the nine-month period, down from 62.6 percent in the six months through December, and 62.7 percent margin in the nine-month period a year earlier. 

"The company’s performance continued to stabilise during the quarter, as refinements to the strategy improved our position from the first half, further regaining ground lost in the first quarter," chief executive David Bracken said in a statement. 

Still, the dual-listed stock fell 4 cents to 66 cents on the NZX, and was down 5.2 percent at 63.5 Australian cents on the ASX. 

The Brisbane-based retailer restructured its business last year, quitting the US and exiting its Emma & Roe sub-brand to focus on high-margin sales and make better use of other sales channels, such as online.

Year-to-date e-commerce sales totaled A$12.5 million, up 53 percent from a year earlier, and accounting mounting to 2.9 percent of group sales. 

Michael Hill also scaled back its discount sales to discourage people from putting off purchases until they could take advantage of those cheaper prices, but changed that strategy when alternative promotions didn't bring punters through the doors. 

Bracken said the retailer's new model helped lift same-store sales in the month of March.

"We have already seen the potential for the new integrated model to lift customer engagement and sales, as well as improve operational efficiencies," he said. 

The retailer has stripped out A$5 million of annual costs and reiterated plans to snip another A$5 million through the rest of the financial year. 

Michael Hill opened one store in Australia and closed three, giving it 171 stores in its biggest market. It had 52 New Zealand stores and 84 Canadian stores at the end of the quarter after closing one store in each region. 


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