A slightly lower New Zealand dollar and discounted prices have cushioned Michael Hill International, but its new US stores are finding the going tough.
The jewellery retailer’s same-store sales are up 1.9% in the nine months to March 31, with the lower kiwi dollar boosting returns from Canada and Australia.
The company’s trading update also showed total all-store sales were up 9.9% on the same period last year.
This was due to a number of new stores opening in Australia, Canada and the company’s new frontier in the US, where $NZ10.9 million of sales have been made since the first stores were opened last October.
However, looking at same-store sales in local currencies provides a more sobering picture.
While Australian same-store sales are up slightly (1.1% compared to 6.4% converted to New Zealand dollars), Canadian same-store sales have dropped 8.7% (compared to being up 0.5% currency-adjusted).
Michael Hill’s New Zealand stores aren’t faring much better, down 8.5%.
Chairman Michael Hill describes the result as “solid” but does sound a note of caution about the numbers.
“These sales results were achieved on lower margins as a result of increased “sale” activity in all markets in an attempt to offset the difficult global retail environment.”
He says the company’s management is focusing on cost reductions to offset the lower margins, while acknowledging the difficulty its fledgling US operation is facing in a country where unemployment just hit 8.5% and economic doom abounds.
“The US continues to be a tough market to operate in and management is focused on improving the US business and establishing the brand,” Mr Hill says.
The company has always acknowledged how hard conditions would be in the US.
Chief executive Mike Parsell said in October that recessions are good times to expand while real estate and other costs are low, and confirmed that the company is committed to its growth strategy despite the dismal immediate outlook in the US.