Michael Hill Jewellers rash of robberies: seven in 12 months

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Burglars smashed the window of the Michael Hill store in Pukekohe in an overnight raid earlier this month. Image credit: South Magazine/Facebook

New Zealand police are investigating another burglary at a Michael Hill jewellery store, taking to seven the number of heists targeting the business over the past 12 months.

The most recent burglary took place on Sunday 18 July at Pukekohe in south Auckland.

“Acting Detective Senior Sergeant Michele Gillespie said a ‘quantity of jewellery’ was stolen, with the burglars fleeing the area afterwards”

According to the New Zealand Herald, a group of offenders forced their way into the store at around 12.30am. Acting Detective Senior Sergeant Michele Gillespie said a “quantity of jewellery” was stolen, with the burglars fleeing the area afterwards.

An employee said she received a phone call from security shortly after the incident; a team member met with police later that morning.

The latest incident follows a robbery two weeks ago – the sixth in the past year – when two men robbed the Michael Hill store at Waitakere’s West City Mall on Saturday 3 July.

According to media reports at the time, the thieves made off with pieces valued at $NZ100,000 ($AU94,683), including the store’s stock of larger chains and watches, some of which were valued at $NZ18,000 to $NZ25,000.

A Michael Hill employee said, “They knew what they were getting.”

In May, two off-duty police officers and local retailers stepped in to foil the robbery of a Wellington jewellery store.

As previously reported by Jeweller, Deputy Commissioner Tania Kura and her partner, retired Detective Inspector David Archibald, noticed a commotion inside the Michael Hill store in the Lambton Quay area while on a morning walk.

Archibald told New Zealand news website Stuff.co.nz, “I ran into the store and saw a masked and gloved man grappling with the store manager. I managed to get quite a good grab on him. He was pretty strong but from experience, you know, [I] never let go.”

Kura phoned police and several staff from nearby stores rushed to provide assistance.

“I saw someone pulling his belt off and another had the price tag still on it,” Archibald recalled.

“A staff member had brought the belt from their stock to help tie him up, which was smart thinking.”

On-duty officers soon arrived at the scene and arrested the would-be robber, recovering jewellery valued at $NZ28,000 ($AU26,049).

Added Kura, “Police, with the help of some brave members of the public, have taken a risk-taking thief off the street.”

The Pukekohe robbery is one of a spate of Michael Hill Jewellers targeted in the Auckland region including the Queen Street store which was subjected to an overnight smash-and-grab raid on Friday 23 April, and the Westfield Albany store that was burgled on Monday 26 April, with a “large quantity” of jewellery stolen.

Several people – including teenagers – have since been charged in relation to those crimes.

Michael Hill International Limited’s (ASX:MHJ) Stock is Soaring But Financials Seem Inconsistent: Will The Uptrend Continue?

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Most readers would already be aware that Michael Hill International’s (ASX:MHJ) stock increased significantly by 13% over the past three months. However, we wonder if the company’s inconsistent financials would have any adverse impact on the current share price momentum. Specifically, we decided to study Michael Hill International’s ROE in this article.

Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. Put another way, it reveals the company’s success at turning shareholder investments into profits.

View our latest analysis for Michael Hill International

How Do You Calculate Return On Equity?

The formula for return on equity is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Michael Hill International is:

11% = AU$21m ÷ AU$191m (Based on the trailing twelve months to December 2020).

The ‘return’ is the amount earned after tax over the last twelve months. That means that for every A$1 worth of shareholders' equity, the company generated A$0.11 in profit.

Why Is ROE Important For Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company’s future earnings. We now need to evaluate how much profit the company reinvests or “retains” for future growth which then gives us an idea about the growth potential of the company. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don’t have the same features.

Michael Hill International’s Earnings Growth And 11% ROE

At first glance, Michael Hill International seems to have a decent ROE. Be that as it may, the company’s ROE is still quite lower than the industry average of 19%. Needless to say, the 15% net income shrink rate seen by Michael Hill Internationalover the past five years is a huge dampener. Not to forget, the company does have a high ROE to begin with, just that it is lower than the industry average. Hence there might be some other aspects that are causing earnings to shrink. These include low earnings retention or poor allocation of capital.

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However, when we compared Michael Hill International’s growth with the industry we found that while the company’s earnings have been shrinking, the industry has seen an earnings growth of 6.8% in the same period. This is quite worrisome.

Earnings growth is an important metric to consider when valuing a stock. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. Doing so will help them establish if the stock’s future looks promising or ominous. If you’re wondering about Michael Hill International’s’s valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Is Michael Hill International Making Efficient Use Of Its Profits?

Michael Hill International’s declining earnings is not surprising given how the company is spending most of its profits in paying dividends, judging by its three-year median payout ratio of 75% (or a retention ratio of 25%). With only very little left to reinvest into the business, growth in earnings is far from likely. To know the 2 risks we have identified for Michael Hill International visit our risks dashboard for free.

In addition, Michael Hill International has been paying dividends over a period of five years suggesting that keeping up dividend payments is preferred by the management even though earnings have been in decline. Based on the latest analysts' estimates, we found that the company’s future payout ratio over the next three years is expected to hold steady at 67%. Still, forecasts suggest that Michael Hill International’s future ROE will rise to 18% even though the the company’s payout ratio is not expected to change by much.

Summary

In total, we’re a bit ambivalent about Michael Hill International’s performance. On the one hand, the company does have a decent rate of return, however, its earnings growth number is quite disappointing and as discussed earlier, the low retained earnings is hampering the growth. That being so, the latest industry analyst forecasts show that analysts are forecasting a slight improvement in the company’s future earnings growth. This could offer some relief to the company’s existing shareholders. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

Michael Hill trades up in FY21 despite 10,000 lost trading days

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Michael Hill has enjoyed a “solid” year of sales despite the impact of the Covid-19 pandemic, with same store sales up 8.6 per cent for the year to 27 June despite over 10,000 lost trading days.

Digital sales grew 1.1 per cent and broke $30 million for the first time for the group, hitting 6.2 per cent of full year sales.

“This performance provides further evidence that our strategic transformation agenda is on track and delivering. We’ve seen record digital sales, our loyalty program going from strength to strength, further development of omni-channel initiatives, and continued evolution of our product offering, go-to-market campaigns and retail fundamentals,” said Michael Hill chief executive Daniel Bracken.

“I’m particularly proud that we have taken a strong and proactive position in supporting our team members during these very challenging times. The connections with out teams, customers and suppliers continue to be at the forefront of our minds.”

The business generated all store sales growth of 116 per cent in its final quarter of the year, landing at $116 million compared to the $53 million seen last year, with Australians stores seeing sales double and New Zealand stores up 129.9 per cent.

For the full year, Australian stores saw sales grow 17.4 per cent, while New Zealand stores were up 19.1 per cent.

“The company continues to navigate a disrupted retail environment, with significant store closures on a regular basis,” Bracken said.

“[However], we finished the year with a strong trading performance and a very robust balance sheet. Combined with the demonstrated traction in our growth strategies, this sees the company well-positioned to continue its earnings trajectory and explore new opportunities.”

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