Modest sales growth for Michael Hill in first nine months

Third quarter results show particular promise for its new Emma & Roe brand.

Michael Hill International [NZX: MHI] same store sales have grown just over 5% in the first nine months of its financial year.

Same-store group revenue in the nine months to March 31, 2016, increased 5.1% to $A397 million while all store sales increased 9.1% to $A420 million.

The Michael Hill brand in the Australian market grew 3.5% for the nine months, with the third quarter trading particularly well, the company said in a note to the NZX this morning.  

New Zealand same-store sales grew 6.5% in local currency while Canada was up 5.8% up on last year.

The US, which has lagged in recent years, performed well during the quarter. It recorded same-store sales growth of 9% for the quarter and up 2.9% on the same period last year. Total store sales in the US were up 28.5% for all stores.

Chief executive Mike Parsell told NBR last week that while the US is still in trial mode – as it has been in the past eight years, detracting from analysts’ valuation of the stock – the company is more likely to expand there than quit.

“There’s no discussion at the moment of exiting the US market. It still presents us with the largest opportunity to build the business. And we’re learning a lot from being there.”

Eight new Michael Hill stores opened during the period to take the total to 295, throughout its four markets.

The company’s new Emma & Roe brand – cheaper charm jewellery aimed at younger consumers – is trading well, with same-store sales growth of 39.9% to $A4.4 million for the nine months to March 31.

This launched in April 2014 and is still being tested on the Australian market, plus one store in Manukau.

Six new stores opened during the period to bring the total to 14, and there are plans to open a further two stores before the end of the financial year.

Mr Parsell says the directors are “delighted” with the improvement of the new brand.

“It’s showing a lot of promise. The trial involves fully expanding the Queensland market so we can see with good scale and penetration what the brand is capable of,” Mr Parsell says.

A decision on whether to expand or exit will be made at the end of the financial year in June but, for now, Mr Parsell says: “I definitely think we’re leaning more toward keeping it than exiting it.”

No guidance was given for the full year.

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