Michael Hill delivers record sales as demand for diamonds picks up

Michael Hill delivers record sales as demand for diamonds picks up

Brisbane-based retailer Michael Hill (ASX: MHJ) has posted record sales for the first half of the financial year as shoppers in Australia and New Zealand return to splurging on jewellery in-store.

In an update on the ASX, the company announced revenue increased 11 per cent year-on-year to hit a record $363.4 million while gross profit rose from $213 million to $237 million.

Net profit was up 1.2 per cent to $37.6 million and earnings increased by 5.3 per cent to reach $58.7 million.

“To deliver record results across sales, gross profit and comparable EBIT for the first half is a testament to all facets of the business having aligned to produce these results, demonstrating the traction of our strategic growth initiatives and reaffirms the success of our brand elevation journey,” Michael Hill managing director and CEO Daniel Bracken said.

“With the impacts from COVID behind us, significant productivity gains on pre-pandemic trade have been delivered across an optimised store network in all markets.

“I’m particularly pleased elevated gross margins have been sustained, supported by the further evolution of our loyalty program, reimagined digital experience, enhanced product offering and yet another beautifully executed Christmas campaign that truly resonated with our customers.”

Australia delivered the strongest revenue result for the jeweller, generating $190.6 million for the half – reflecting an increase of 18 per cent on the year prior. Due to store closures in 2022, Michael Hill also noted the result was an 8.8 per cent increase compared to the first half of FY21.            

Revenue in New Zealand increased by 13.8 per cent year-on-year to hit NZD$76.3 million (AUD $69.8 million) - a result that is also a 10 per cent increase on 1H21.

In Canada, retail segment revenue came in at CAD$92.1 million (AUD$100 million), a flat result year-on-year but up 22.4 per cent compared to the first half of FY21.

“This result is a credit to the segment considering last year was a record performance, driven by significant pent-up demand following seven months of store closures in Eastern Canada,” Michael Hill said.

The company also noted its loyalty program – Brilliance by Michael Hill – now has more than 1.7 million members and accounts for 82 per cent of sales.

While digital sales declined by nine per cent on last year, they were up 30 per cent on 1H21 and up 148 per cent compared to pre-COVID levels.

Michael Hill also added the latest half saw consumers "return to physical retail where they could engage with team and product directly".

During the half, the jeweller opened three new stores (two in Australia, one in Canada) and closed one under-performing store in Australia, resulting in 282 stores at half year end.

Putting the significant New Zealand weather events to one side, the company said that sales in the first eight weeks of FY23H1 are in-line with expectations.

On the basis that retail trading conditions do not materially deteriorate, Michael Hill anticipates full-year comparable earnings before interest and tax (EBIT) will be ahead of prior year.

Michael Hill is paying a record interim dividend of 4c per share.

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