Why Michael Hill’s CEO is optimistic despite lockdown mauling

]

Total sales in the first seven weeks of 2022 fell 2 per cent because of the lockdowns, reducing expected earnings by $5 million. Currently, 46 stores in NSW, 34 in Victoria and four in the ACT are temporarily closed and all New Zealand stores have been closed for a week.

Citi analyst Sam Teeger said the market expected 2022 profits to fall 21 per cent, given about $15 million in government wage subsidies would not be repeated.

Strategic initiatives

“We expect increasing COVID-19 headwinds to overshadow the potential for further improvements from strategic initiatives,” Mr Teeger said.

However, Mr Bracken is confident sales will rebound once stores have reopened, citing pent-up demand in Ontario and Victoria after lengthy lockdowns.

He said the strong sales growth and rebound in earnings in 2021 were not driven by the pandemic but two years of restructuring the business by the shift to online, reducing promotional discounting, selling more exclusive products and building the retailer’s loyalty program.

Advertisement

“We’ve done two years of hard graft resetting the strategy and … excluding the fourth quarter last year [2020] we’ve had eight quarters in a row of comparable sales growth,” he said.

“Our customers are rewarding us and favouring us over other jewellers and other categories.”

Shift to online

Sales rose 13 per cent to $556.5 million in the 12 months ending June 27, even though the retailer lost the equivalent of 10,447 trading days, with half its stores in Canada closed for six to seven months and Victorian stores closed for more than three months.

Net profit rose 15-fold to a record $45.3 million after the Brisbane-based jewellery retailer shifted online, cut back on discounting, sold more exclusive products and pocketed $14.6 million in wage subsidies from taxpayers in Australia, New Zealand and Canada.

Same-store sales grew 8.6 per cent and digital sales soared 53 per cent after the retailer launched launching virtual selling, a digital loyalty program and shoppable online catalogues.

Advertisement

Michael Hill will launch click and collect for Christmas 2021 and will start selling on The Iconic’s marketplace in a few weeks after testing a wholesale partnership this year.

It is also looking at expanding into new markets overseas, including Asia, by setting up shop on third-party marketplaces to introduce new customers to the brand before potentially launching direct-to-consumer online businesses and possibly even opening bricks and mortar stores.

“We see marketplaces as a natural way for us to enter new international markets because it brings traffic to you, and you don’t have to invest huge dollars to test the market,” Mr Bracken said.

He dismissed suggestions that marketplace selling risked commodifying the Michael Hill brand, by making it easier for shoppers to compare prices, or diluting margins because of fees paid to marketplace operators.

“We’re confident our brand stacks up against competitors,” he said, adding that the product mix would be managed to offset lower gross margins.

Michael Hill shares rose 4 per cent to 86¢, taking gains this calendar year to 23 per cent.

It will pay a final dividend of 3¢ a share, unfranked and payable September 24, after cancelling the dividend in 2020. This took the full-year payout to 4.5¢ a share.

Michael Hill is flush with cash after making A$42.2m more profit

]

Michael Hill chief executive Daniel Bracken warns that lockdowns here and across the ditch are significant and already denting profit for the current financial year.

Jeweller Michael Hill International made an extra A$42.2 million (NZ$43.3m) in profit last year, and ended the year with no debt and surplus cash.

Profit increased to A$45.3m in the 52 weeks ended June 27, from A$3.1m the previous year, the company said in a statement to the NZX. The gross margin increased to 62.7 per cent from 60.6 per cent.

Michael Hill lifted sales 13 per cent to A$556.5m, even though it lost 10,447 trading days due to extensive temporary store closures in Eastern Canada and sporadic closures across Australia. Digital sales increased 53 per cent to a record A$34.8m, representing 6.3 per cent of total sales, up from 5 per cent the previous year.

The company ended the financial year with a cash surplus of A$72.4m and no borrowings.

READ MORE:

Michael Hill received A$14.6m in government grants from Australia, New Zealand and Canada over the past year, compared with A$17.7m in its 2020 financial year.

The company will pay shareholders a final dividend of 3 Australian cents per share, taking the full-year dividend to 4.5 Australian cents. Its interim dividend cost it A$5.8m, while the final dividend will cost it A$11.6m. It also paid an additional 1.5 Australian cent dividend in January which had been deferred from its 2020 financial year.

POOL Prime Minister Jacinda Ardern extends level 4 lockdown in New Zealand.

The jewellery chain closed five underperforming stores in Australia and one in Canada last year, reducing total store numbers to 285.

Chief executive Daniel Bracken warned that while the company was not expecting to close any stores in New Zealand or Australia that the lockdowns here and across the ditch were significant and already denting profit for the current financial year.

New South Wales is entering its third month of lockdown, with all jewellery retailers closed and the Covid-19 related situation continues to affect company results negatively. New Zealand was put into a level 4 lockdown from midnight Tuesday last week.

The company lost 2,755 store trading days during the first seven weeks of this year, resulting in a 2 per cent drop in total store sales for the period, with an estimated loss in earnings of A$5m, Bracken said.

“While I’m delighted to see incredibly strong results from Canada following its full reopening, and the resilience of our New Zealand business, the impact of extensive disruptions in Australia and now New Zealand are very concerning,” Bracken said.

“That being said, our strong financial position provides us with a stable platform to continue our transformation journey, elevate the brand and further explore new opportunities across all channels and markets.”

The company has focused getting up to speed in digital commerce, Bracken said. It has refitted some stores and now offers customers online digital tours, and a ‘real time’ sales guide from that same store.

”We were behind some companies in this area but are now focused and accelerating this aspect of the business,” Bracken said.

Supplied/Supplied Michael Hill has developed virtual consultations and trying on of jewellery.

Although in-store sales make up the majority, the company is looking to sell more online by linking up with other retailers that sell online.

”We are in the final stages of a partnership with Australian company The Iconic to sell via them and this deal is expected to go live in a few weeks,” Bracken​ said.

”After Christmas we are looking to explore other companies we can partner with to expand our online selling.

”There is no limit to what we could achieve this way.”

It has just appointed a chief digital officer and has made several other new recruits with Amy Sznicer​ as chief retail officer and Jo Feeny​ to chief marketing officer.

The company was started in Whangarei by Sir Michael Hill in 1979. His wife Lady Christine has just designed pieces for the jeweller’s August catalogue and Sir Michael is a member of the board. Some gold jewellery is made and designed in New Zealand but 30 per cent is made in Australia. The rest is made in India.

Michael Hill’s full-year profit skyrockets more than 1300 per cent

]

Michael Hill chief executive Daniel Bracken. Photo / Supplied

Michael Hill International’s full-year profit has soared by more than 1300 per cent despite significant disruption from the global pandemic.

The transtasman jewellery business, which also has stores in Canada, posted A$45.33 million ($47.35m) net profit after tax in the 2021 financial year compared to A$3.1m in 2020.

Its earnings before interest and tax (ebit) were A$72.4m, soaring from A$14.1m from FY20.

The final dividend of A3 cents per share was declared taking the total dividend for the year to 4.5 cents per share.

Group operating revenues increased 13.1 per cent to A$556.5m from A$492.1m from 2020 even with 10,477 lost trading days, taking it to almost pre-Covid level in 2019, when sales were at A$569.5m.

The group’s sales were up by 8.6 per cent.

Digital sales increased 53.4 per cent to a record A$34.8m in the year, making 6.3 per cent of total sales, which was up from 5 per cent compared to 2020.

Michael Hill chief executive Daniel Bracken said the company was placing a greater emphasis on digital sales with appointment of Keith Louie as its first chief digital officer.

“His appointment, alongside the recent arrivals of Amy Sznicer, chief retail officer, and Jo Feeney, chief marketing officer, adds significant expertise to our already high calibre leadership team,” he said.

In New Zealand all store revenue increased by 19.1 per cent to $127.1m from $106.7m in FY2020.

Gross margin for the year was 62 per cent (FY20: 59.6 per cent), resulting in the strongest margin in the last five years.

At year end, there were 49 stores trading (FY20:49). Currently, all New Zealand stores are temporarily closed, due to government-mandated lockdowns.

In Australia all store revenue increased by 17.1 per cent to A$312.3m up from $266.6m in FY2020.

At year end, of the 150 Australian stores (FY20: 155), 30 NSW and 2 NT stores were temporarily closed. Currently, 46 NSW, 34 VIC and 4 ACT stores are temporarily closed, due to government-mandated lockdowns.

In Canada all store revenue increased by 6.9 per cent to CA$118.4m ($135.1m) from CA$110.8m in FY20.