Michael Hill International Limited Analysis

Overview

The Michael Hill story began in 1979 when Sir Michael and his wife Christine opened their first store in the New Zealand town of Whangarei, some 160 kilometres north of Auckland. Since then, the company growth has been guided by a unique retail jewellery formula. Through dramatically different store designs, a product range devoted exclusively to jewellery and development of high impact advertising, Michael Hill Jewellers rose to national prominence. In 1987 Michael Hill International was listed on the New Zealand Stock Exchange, the same year the Group expanded into Australia.

In 2002, Michael Hill expanded into North America, opening its first stores in Vancouver, Canada. The Canadian presence now includes stores in British Columbia, Alberta, Manitoba, Saskatchewan and Ontario.

The first Michael Hill stores opened in the United States in September 2008. There are now stores in Illinois, Ohio, Minnesota and New York.

Exclusive jewellery collections available at Michael Hill stores include Michael Hill Designer Bridal, Infinitas, Everlight and Spirits Bay (New Zealand only).

As at June 2016, there are 168 stores across Australia, 52 in New Zealand, 67 in Canada and 10 in the United States. There are also four Michael Hill online stores servicing each market.

In June 2016, Michael Hill under took a Scheme of Arrangement with a plan to become a dual-listed company. Michael Hill relisted on the New Zealand Stock Exchange and listed as a primary listing on the Australian stock exchange effective 7 July 2016.

Performance

The following information was extracted from Michael Hill International Limited's Full Year results, released on 2 September 2024:

Key Financial Results

• Group revenue increased by 4.2% on a 52-week basis (including Bevilles) to $644.9m, and by 2.4% on a statutory basis (FY23: 53 weeks).
• Group gross margin settled at 60.6% in line with previous guidance, impacted by higher input costs and increased promotional activity in response to more aggressive retail trading conditions. In addition, during the last two months of FY24, there was deliberate focus on promoting inventory to make way for higher margin product in FY25.
• Comparable earnings before interest and tax (EBIT) of $15.9m, at the upper end of previous guidance.
• Statutory net profit after tax decreased to a loss of $0.5m with the variance to comparable EBIT performance largely driven by AASB16 Leases & SaaS, finance costs and normalisations. • Active management of inventory delivering a ~$7m reduction to $195.8m.
• As a proactive capital management measure, the existing debt facility has been increased by $40m for the fourmonth period from 15 September 2024 to support seasonal working capital requirements for Christmas trade.
• Closing net debt position of $38.7m, having deployed cash to support ongoing investment in the business.
• No final dividend was declared, delivering total dividends for the year of AU1.75 cents per share.

Operational Performance

• Group revenue was up 4.2% for the year on a 52-week basis, with Australia +10.3%, New Zealand -11.8% and Canada flat.
• Digital sales grew 16% to $47.9m for the year, demonstrating a strong return to growth.
• Complete refresh of the Michael Hill brand, across digital platforms, new brand logos, colour palette, instore visual merchandising and packaging.
• Partnering with our first ever global Brand Ambassador, Miranda Kerr, who perfectly embodies our brand values and sustainable business practices.
• Aligned with the brand relaunch, the Michael Hill brand opened its first true global flagship store, at Chadstone, Australia’s leading fashion destination.
• Launched the Michael Hill Foundation, focused on empowering women and restoring nature.
• Expanded our Re:new sustainable jewellery ecosystem: extending our re:cycle offering to Canada and New Zealand, launching diamond trade up program, re:imagine in New Zealand, and investing in our repairs network to grow our re:store (repairs) capability and service offering.
• Integration of Bevilles onto Group operational systems and successful relocation of the head office, supply chain and distribution centre from Victoria to Queensland
• In line with our store network strategy, the core Michael Hill brand has continued to optimise its store network throughout the year, while at the same time expanding the Bevilles’ store network from 26 to 36 stores. The Group finished the year with 300 stores (FY23: 304).

Current Trading Update

• For the first eight weeks of FY25, Group sales were up 3.2%, and Group same store sales were up 2.7% on prior year, with same store sales for the:
• Australian segment up 5.0%,
• Canadian segment up 4.0.%, and
• New Zealand segment down 6.2%.