Jewellery retailer Michael Hill has more than doubled its net profit after tax year on year over the six months to 31 December 2018, earning $19.5 million over the period – a 125 per cent increase over the prior corresponding period, which landed at $8.7 million.
The business’s previous first-half result was affected heavily by one-off costs associated with the of the Emma & Roe and US business, which the brand exited from after poor performance.
Over the previous financial year all US stores were closed, with only two Emma & Roe stores left to shut.
“The company made a series of challenging but necessary changes over the past year, as it transitioned to a new strategy focused on the core Michael Hill brand and long-term sustainable growth,” Michael Hill chair Emma Hill said.
During the half-year period, revenue for the period fell 2.7 per cent to $315.4 million, down from $324.1 million, with weak trading performance during the first four months of the half weighing down on the result, during which the business shifted away from a discounting model.
However, revenue increased 2.9 per cent over the busy holiday period, with the business attributing a more “refined approach to event and promotional campaigns”.
Fellow jewellery retailer Lovisa also complained of difficult trading conditions over the period, with the business’s Australian arm underperforming in the six months to 31 December 2018.
Lovisa noted that major trends in the fashion jewellery space that had previously driven comparable store sales in past years were not present over the half.
Michael Hill’s e-commerce sales accounted for 3 per cent of total sales, having grown 68.3 per cent to $9.5 million.
The jeweller’s New Zealand business also saw revenue drop over the period to NZ$65.7 million, down 5.6 per cent NZ$69.6 million. Earnings before interest and tax also fell 4.5 per cent to NZ$15 million, from NZ$15.7 million during the prior corresponding period.
After beginning the role in September of 2018 chief executive Daniel Bracken commenced a review of the Michael Hill business, and announced a series of “strategic shifts”. These decisions have now been refined, with Bracken signalling Michael Hill’s priorities over the next six months.
The business will begin to shift its business model toward a “more sophisticated and integrated” customer-led experience, hoping to create a more personal experience for customers.
Additionally, the brand’s online strategy is set to be improved over the second half, with a number of “scalable digital and omni-channel strategies” set to be implemented.
“The past three months have validated my initial views on the business that there is enormous potential to leverage the brand strength and heritage of Michael Hill, with a modern approach to retailing,” Bracken said.
“The first half presented some significant challenges, so our immediate focus is to restore financial performance, reset our agenda and deliver our long-term strategy for sustainable growth.”
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