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Michael Hill has made no secret of his belief the recession is the best time to buy into the US market but is continued expansion sustainable?
According to the company results announced this morning, it is but "modestly."
Michael Hill International (MHI) reported a $69.5 million net profit for the year to June 2009, up 175.6% from the previous year's profit of $25.23 millon. Its net profit was helped by a $52.9 million deferred tax credit after restructuring in December 2008.
Operating revenue rose 9.4% to $411.9 million while ebit at $26.193 million was down 38%.
Chief executive Mike Parsell said the company had its eye on further expansion to meet its goal of 1000 stores by 2020. "We're looking to build the business but we will be much more selective [in the next year]."
That means ensuring any new stores are a true opportunity on the right commercial terms, he said.
In September last year, MHI bought into the US by acquiring 17 stores in Illinois and Missouri from Whitehall Jewelers who were in Chapter 11 Bankruptcy.
Since then, under difficult US trading conditions, revenue hit $U9.088 million and there was an operating loss of $U3.094 million for the same period (NZ$5.292m).
Trading conditions in Canada, where the company opened four new stores, were also tough, with MHI reporting an operating loss of $C239,000 compared to a $C998,000 profit over the previous period.
Mr Parsell said results from the company's Australian sector reflected the strength of the business and the market share. The company opened eight new stores in Australia and generated $A221.113 million in revenue, an increase of 4.3%.
The result also mirrored the Australian economy, which has held up better than other countries with the help of the government's stimulus packages, he said.
"We're pretty happy with the Australian result but there is room for
A rather different look
Michael Hill Jeweler on Wellington's Lambton Quay was the first New Zealand store to get a more upmarket makeover under a plan to transform the look of all stores.
"Our hope is that it will appeal to consumers and bring new consumers in as well," Mr Parsell said.
Part of a strategy to "reinvent" the Michael Hill brand, the company also hopes it will set the stores apart from its competitors across all segments.
In New Zealand, new consumers would be welcome. Revenue to June 2009 decreased by 6.8% to $90.393 million and ebit decreased by 18.9% to $14.954 million.
Coriolis Research retail consultant Tim Morris said that realistically,
jewelry was a discretionary spend. "If they are getting reasonable results and they're saying there is some room for expansion, it's a sign that the worst of the storm is over."
Mr Parsell said directors were confident in the continued growth of and profitability of the group, despite an expected modest growth over the next 12 months.