Michael Hill International’s annual results have highlighted its attempts to move into the high-end market and the cost of ram raids on its New Zealand stores.
For the 53-week year ending July 2, 2023, the jeweller reported comparable group earnings before interest and tax (Ebit) of A$58.9 million (NZ$63.87), down 6.8 per cent from A$62.9m in the prior year. This was the result of inflationary cost pressures and added NZ security costs.
Its NZ retail revenue increased by 5.8 per cent to NZ$132.4m for the year, with a gross margin of 61.9 per cent, compared with 63.4 per cent in the prior period. This was largely attributable to the higher penetration of diamond sales in this market. This result was above pre-pandemic levels of 60.8 per cent.
“NZ earnings were directly and adversely impacted by a ~$5m investment required to be made for uplifted and ongoing security measures to protect our team, customers and stores. Additionally, impacted stores experienced softer sales in the period immediately following an incident. During the year, two underperforming stores closed, resulting in 46 stores at year-end (FY22:48).”
The company’s largest market in Australia also grew, while Canada was flat.
“While the company delivered record revenue for the year, this was driven by a particularly strong first half performance, followed by a more challenging second half as macroeconomic conditions deteriorated and consumer confidence declined,” Michael Hill said.
It said there was a healthy inventory position to support elevated sales at A$203.3m (FY22: A$181.5m), with the increase mainly attributable to the Bevilles acquisition. The Bevilles deal was completed on June 1, so four weeks of trading were included in the group’s annual results.
Going upmarket
With the inclusion of 26 Bevilles stores, the store network totals 304 across all markets at the end of the year. This compared with 280 in the prior year for the group. For Michael Hill, three new stores opened – two in Australia and one in Canada – and five underperforming stores permanently closed – three in Australia and two in NZ – during the year.
The group strategy for the future remained an “aspirational brand journey to a more premium position”.
The Bevilles acquisition was a vehicle to take market share at the value end of the fine jewellery category.
As well, in the first half of the 2024 financial year, the company will launch its new bespoke brand TenSevenSeven, focused on servicing the high-end of the market with its “unique personalised diamond ring proposition”.
The company said with these additional brands, the Michael Hill Group now “services all significant customer segments of the fine jewellery category, and delivers multiple new growth pipelines”.
TenSevenSeven is seeking high-end customers who want unique diamonds, paired with a handcrafted ring design of their choice.
Hallenstein reports
Meanwhile, another retailer, Hallenstein Glasson Holdings, also reported increased sales.
In a trading update ahead of its full annual result announcement at the end of September, Hallenstein said group sales for the 12 months ended August 1, 2023, were $409.71m, an increase of 16.7 per cent on the prior year’s $351.21m.
Group net profit after tax (NPAT) is expected to be within the range of $31.8m to $32.3m, an increase of about 25.2 per cent on the prior year.
The results of the prior corresponding period included multiple store closures across Australia and NZ due to lockdowns for much of the first three months.