Michael Hill issues profit warning
Michael Hill International has warned its first-half earnings will more than halve as the jeweller gears up to exit its US venture.
The Brisbane-based company says earnings before interest and tax will be about $A15 million in the six months to December 31, down from $A40 million a year earlier.
This includes the impact of a one-off charge of the US and Emma & Roe store closures of about $A20 million.
About $A8.4 million of this is from onerous lease provisions and $A11.4 million from impairment charges on property, plant and equipment.
It told the market last month it would wind up its nine US stores after a decade-long investment failed to build a profitable business, despite trialling several fresh initiatives to spur demand.
The US business lost between $2-4 million a year for the past nine years. US same-store sales in the six months to December 31 dropped 10% to $US5.7 million while total sales fell 14.6%.
Its Emma & Roe brand is also under review with a switch in sales strategy ahead. The store footprint will shrink while the brand goes into trial mode again over the next 18 months.
Michael Hill chief executive Phil Taylor says despite the one-off accounting impacts from store closures, the actions taken to reduce the Emma & Roe store footprint and exit the US are “critical” to strengthen the company’s foundations and build significant long-term value.
The company is still negotiating with landlords over the Emma & Roe stores and US exit and hasn't determined the final timing or cash cost of the closures, he says.
Shares have fallen 5.8% today but have risen 3.24% over the past 12 months, to $1.29.