Jeweller shuts stores to cut costs

Jewellery retailer Michael Hill has axed senior managers and closed six stores worldwide amid a 10 per cent decline in New Zealand sales in the months including Christmas.

In a trading update revealing sales figures for the six months to the end of December, the company’s chief executive, Daniel Bracken, said difficult trading conditions and aggressive competition put its margins under significant pressure.

“As a result, the company has taken direct actions to reduce operating costs, including the exit of a number of senior management roles.”

Sales across the group were up 4 per cent in the last six months of last year to A$362.8 million ($389.9m), when including sales from the Australian family jewellery business Bevilles, which it bought in June for $45m.

But sales for the core Michael Hill brand were down from the first half — a figure was not revealed.

A 10.2 per cent increase in sales in Australia and 0.6 per cent lift in Canada were largely offset by a 10.3 per cent decline in its New Zealand business.

Five under-performing stores in Australia and one in Canada were closed.

However, Bracken said it performed well against the broader jewellery retail industry.

“While the first half was definitely a challenging period for our business with sales for the core Michael Hill brand down, we are encouraged by our performance against the broader jewellery sector.”

He also pointed to the impact of higher input costs for gold and diamonds, and more promotional activity during the Christmas, Boxing Day and Black Friday shopping season.

“Inflationary forces saw elevated costs across many aspects of the business, which together impacted ebit [earnings before interest and tax] for the half.”

Its margins were expected to be sitting between 61 per cent and 62 per cent in the half-year just ended. The latest figures follow three years of record financial results, Bracken said.

The dual-listed company now had 272 Michael Hill stores in Australia, New Zealand and Canada. Including Bevilles’ Australian stores, it had 302.

“Even though consumers continue to monitor their discretionary spend, our multi-brand strategy puts us in a strong position to continue taking market share from our competitors as we expand the Bevilles network and elevate the Michael Hill brand.”

Online sales had returned to growth and now made up 8 per cent of the group’s total sales.

The company’s earnings were expected to be between $30m and $33m when it released its official, audited financial result, likely to be during the company earnings season starting in February.