Michael Hill International Limited (ASX/NZX: MHJ) has released its financial results for the 52-week period ending 30 June 2024. The company faced challenging retail conditions influenced by broader economic factors, particularly affecting the fine jewellery sector. Despite these hurdles, Michael Hill reported positive sales momentum across all markets in the latter part of the fiscal year.
New Zealand Market Performance
In New Zealand, segment revenue declined by 11.8% compared to the previous year, with a 12% decrease in the second half of the fiscal year. The number of stores in New Zealand decreased from 46 to 44 by the end of FY24.
Overall Financial Performance
Comparable EBIT and Group Sales – Michael Hill’s FY24 Group comparable EBIT is anticipated to be between $14 million to $16 million, aligning with analysts’ expectations. Group sales, including those from Bevilles, increased by 3.8% compared to the previous year, with a 4.9% rise in the second half. The last seven weeks of FY24 showed a 6% increase in Group sales, with notable growth in the core Michael Hill brand in Australia and Canada.
Gross Margin and Inventory – The company’s gross margin for the year settled at approximately 60.5%, a result of improved trading conditions in May and June and a strategic focus on clearing inventory to introduce higher margin products in FY25. Inventory levels at the year’s end surpassed management’s expectations.
Digital Growth – Digital sales experienced a resurgence, achieving double-digit growth over the prior year. This growth was supported by the re-platforming of Michael Hill’s website, coinciding with the brand’s elevation efforts.
In a strategic move to manage capital, Michael Hill increased its existing debt facility by $40 million for four months starting from 15 September 2024. This increase is intended to support seasonal working capital needs for the Christmas trading period. The company’s net debt position at FY24 year-end was approximately $40 million.
Store Portfolio Management – Michael Hill continued to optimise its store network while expanding the Bevilles brand from 26 to 36 stores, ending the year with a total of 300 stores across all markets.
Management Commentary
Daniel Bracken, Managing Director and CEO of Michael Hill International Limited, commented on the results:
“While challenging economic conditions have persisted across all markets throughout the year, particularly in the fine jewellery segment, the Group has continued to outperform the category, with a focus on retail fundamentals and execution of its clearly articulated strategies. Particularly pleasing was the consistent performance of our Canadian business throughout the year.
“While FY24 was disappointing, and trading conditions are expected to remain challenging, initiatives are underway to drive sales and productivity, enhance margin, optimise inventory, prioritise and reduce capital expenditure to protect the balance sheet, and further embed cost-conscious discipline across the business.
“As a key milestone of the Michael Hill brand elevation journey, April saw the unveiling of our first global flagship store at Chadstone in Melbourne showcasing the new brand codes, our first brand ambassador, Miranda Kerr, and a complete re-platforming of our website. I am extremely proud of the enthusiasm, passion, and dedication demonstrated by all our team involved in the meticulous and considered delivery of such a pivotal moment for the Michael Hill Brand.”
Implications for the Industry
The financial results highlight the resilience and adaptability of Michael Hill in a challenging economic environment. The company’s strategic initiatives, including inventory management, digital transformation, and capital management, are geared towards sustaining growth and improving margins. For the wider jewellery industry, these results underscore the importance of strategic planning and agility in navigating economic headwinds.
