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Michael Hill to cut subsidiary brand by 80 per cent

Emma&RoeSMALL

Updated: 11:55 AEST

Michael Hill will spend $5.8 -$7.9 million closing all but six of its 30 Emma & Roe stores by the end of the financial year as part of its repositioning of the struggling brand.

The move will see Emma & Roe exit its operations in New Zealand and New South Wales to focus specifically on south-east Queensland.

In an update provided to the market on Tuesday morning Michael Hill said that its review of the Emma & Roe brand, kicked off in January after another set of lacklustre trading results, was now completed.

While management believes there’s an opportunity for the business in the demi-fine jewellery segment, it has opted to drastically reduce the brand’s footprint and will move forward with a “smaller, concentrated store footprint” for an initial trial period that will run until the end of FY19.

Michael Hill has already negotiated non-binding lease exit terms with most of its Emma & Roe landlords and will now move forward with binding negotiations, which will likely see the brand exit several states and concentrate on a “single market area”.

Chief financial officer Andrew Lowe told Inside Retail on Monday morning that Michael Hill will consider scaling the brand back-up in the future, but wants to preposition the company in an agile way.

“30 stores is a very large footprint and the intention is to reposition the brand…we want to do that effectively and in an agile way with that smaller footprint,” he said.

Michael Hill said it will redeploy Emma & Roe employees to Michael Hill stores where possible, but will undertake redundancy arrangements for others, with total severance costs expected to be finalised in 2H18.

Severance costs, alongside one-off cash costs associated with lease terminations, are expected to cost $5.8 – $7.9 million, although management said this reflected the information currently available to it and was subject to change.

The company also said that its negotiation to exit its nine stores in the US are ongoing with landlords.

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