Michael Hill results indicate transformation on track

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Despite the ongoing COVID-19 pandemic, Michael Hill International has recorded strong financial results for the year with a lift in same-store sales and e-commerce.

Michael Hill International (MHI) has reported an after-tax profit of $45.3 million for the year ended 30 June 2021, a significant increase from its 2020 result of $3.1 million.

Earnings before interest and tax were $72.4 million, compared with $14.1 million the previous year.

“I am particularly proud of our results, underpinned by strategy execution and the resilience of our team” Daniel Bracken, Michael Hill International

The company’s revenue from Australian stores was $312.3 million, a 17 per cent increase compared to FY20, while revenue from New Zealand stores exceeded $121 million – 19 per cent increase over the previous year.

Commenting on the result in a media release, Daniel Bracken, CEO MHI, said, “I am particularly proud of our results, underpinned by strategy execution and the resilience of our team.

“The transformation agenda touches every single part of our business, working together to deliver common goals – the results speak for themselves, and I couldn’t be happier.”

Bracken added, “Setting aside the global store network closure in 2020, the company has now delivered eight consecutive quarters of positive same-store sales growth together with sustained margin expansion.”

As at 30 June 2021, there were 150 Michael Hill stores in Australia – a loss of five stores on the previous year and representing more than 52 per cent of its 285 total store count.

Currently, 46 NSW, 34 Victorian and 4 ACT stores are temporarily closed due to government-mandated lockdowns.

The company had 49 stores in New Zealand – no change from the previous year – and at the time of publication, all were temporarily closed due to lockdowns.

Bracken explained: “Throughout the year, we successfully navigated the complexity of the global pandemic, with half our Canadian stores closed for many months, and sporadic temporary closures across our global network.

“While it was an incredibly challenging year, the strength of our brand and the determination of our team delivered record results and further validates the transformation is on track.”

MHI also experienced encouraging results in Canada, where all-store revenue increased by 6.9 per cent to $CA118.4 million, up from $CA110.8 million the previous year.

This included a same-store sales increase of 6.8 per cent.

The company noted: “This segment was heavily impacted by temporary store closures in Eastern Canada, with 6,525 lost store trading days for the year. By early July, all 86 stores were open and have remained trading, with our strategic focus now returning to the productivity opportunity in the market.

“Gross margin for the year was 61.3 per cent (FY20: 57.8 per cent), a significant improvement on both FY19 and FY20.”

The road ahead

The financial announcement noted that MHI had experienced “significant lost sales in the first seven weeks of FY22 due to lockdowns in Australia, strong early performance in Canada and New Zealand contributed to +17 per cent group same store sales for the period.

“These early results further demonstrate the progress and traction of the brand, however the increased disruptions in Australia and now New Zealand, are significant.”

Management estimated that the 2,755 lost trading days – a figure calculated by adding the opening hours of all temporarily closed stores – would lower revenue expectations by $5 million, with sales down 2 per cent.

In an effort to improve and expand its e-commerce business, Keith Louie was appointed to the newly-created role of chief digital officer.

Bracken said, “With our strategic agenda progressing, we are placing a greater emphasis on digital, with the appointment of Keith Louie, as our 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 added, “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.”

MHI’s digital sales increased by 53.4 per cent in FY21 to a record $34.8 million, representing 6.3 per cent of total sales – and increase from 5 per cent the previous year.

Another ram-raid at Whakatāne Michael Hill Jewellers

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Michael Hill Jewellers in Whakatāne. Photo / Google Maps

Michael Hill Jewellers in Whakatāne has been ram-raided again.

A police spokeswoman said police were notified of an alarm sounding at Michael Hill Jewellers in Whakatane around 4.30am today.

“On arrival, the building appeared to have been broken into with a vehicle. It doesn’t appear anything was actually taken from the store,” she said.

“Police have found the vehicle of interest a short time later on a nearby street, and are following positive lines of inquiry to identify and locate those involved.”

It’s the second time the store has been ram-raided in less than two months.

Have Insiders Sold Michael Hill International Limited (ASX:MHJ) Shares Recently?

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Some Michael Hill International Limited ( ) shareholders may be a little concerned to see that the Non-Executive Director, Emma Hill, recently sold a substantial AU$3.0m worth of stock at a price of AU$0.75 per share. That sale reduced their total holding by 21% which is hardly insignificant, but far from the worst we’ve seen.

Michael Hill International Insider Transactions Over The Last Year

In fact, the recent sale by Emma Hill was the biggest sale of Michael Hill International shares made by an insider individual in the last twelve months, according to our records. That means that an insider was selling shares at around the current price of AU$0.83. While we don’t usually like to see insider selling, it’s more concerning if the sales take place at a lower price. We note that this sale took place at around the current price, so it isn’t a major concern, though it’s hardly a good sign.

You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!

ASX:MHJ Insider Trading Volume September 10th 2021

I will like Michael Hill International better if I see some big insider buys. While we wait, check out this free

Does Michael Hill International Boast High Insider Ownership?

Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Michael Hill International insiders own about AU$22m worth of shares. That equates to 6.7% of the company. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

What Might The Insider Transactions At Michael Hill International Tell Us?

An insider sold Michael Hill International shares recently, but they didn’t buy any. Looking to the last twelve months, our data doesn’t show any insider buying. But it is good to see that Michael Hill International is growing earnings. Insiders own shares, but we’re still pretty cautious, given the history of sales. So we’d only buy after careful consideration. While we like knowing what’s going on with the insider’s ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. To help with this, we’ve discovered (1 is a bit concerning!) that you ought to be aware of before buying any shares in Michael Hill International.

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For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.

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