Michael Hill International (MHI) has revealed significant operational challenges in New Zealand, citing serious crime and macroeconomic pressures as key factors.
In its latest earnings update for the 45-week period ending May 12, MHI highlighted the adverse impact on consumer behaviour and discretionary spending.
Crime and Economic Pressures
New Zealand was identified emerged as the most challenging market for MHI, with rising serious retail crime events, including ram raids, severely affecting store operations. The repeated offending has led to the closure of several stores, notably the Takapuna branch. MHI also reported a decline in consumer credit approval rates in NZ, further exacerbating the negative sales trend.
“The continued negative sales results are also driven by a decline in consumer credit approval rates across the country and an increase in serious retail crime events impacting a number of our stores,” the company stated.
Sales Performance and Financial Impact
Despite initial expectations for positive sales momentum in the second half, MHI’s performance remained subdued, mirroring first-half results with ongoing margin pressure. New Zealand sales for the period were down 11.1%, reflecting the broader economic challenges.
Group sales, inclusive of the recently acquired Bevilles, rose by 4.7% year-on-year. However, the core Michael Hill brand continued to report negative growth compared to the previous year. Shares in MHI dropped by 16.6% to 55 cents, marking their lowest point since November 2020.
“Unfortunately this has not materialised, with second-half sales performance broadly in line with the first half, and margin still under pressure,” MHI reported.
Broader Industry Implications
The rise in retail crime, such as ram raids, poses significant risks not only to MHI but to the broader retail sector. Recently, telecommunications giant One NZ closed its Auckland downtown store over staff safety concerns, highlighting the widespread impact of such criminal activities.
For jewellers, these developments underscore the importance of robust security measures and the need to adapt to evolving economic conditions. The focus on cost management and strategic initiatives to drive sales will be critical in navigating these challenging times.
