Not all that glitters is gold in Michael Hill Jewellers' upbeat Christmas trading result

Not all that glitters is gold in Michael Hill Jewellers' upbeat Christmas trading result

A 10.5 per cent lift in Canadian sales, combined with a stronger Canadian dollar, helped offset sales declines at home in Australia. 

Jewellery retailer Michael Hill International (ASX: MHJ) has posted sales upticks for the combined November-December Christmas period, but the surge in activity was unable to offset an overall trading decline for the second quarter of FY19.

CEO Daniel Bracken describes the company's performance over the key trading period as encouraging, with group revenues for continued operations and same store sales increasing by 2.9% and 1.3% respectively year-on-year.

November and December are traditionally the biggest months for generating revenue at the Brisbane-based company, which has operations in Australia, New Zealand and Canada.

"A refined approach to our event and promotional activities resulted in a lift in sales during our two busiest months," says Bracken.

"This was a good outcome in a challenging retail environment and demonstrated the capability and cohesion of the Executive and retail management team.

"The Company demonstrated resilience and agility in responding to the challenges of the opening four months, and delivered positive sales in the key Christmas trading period."

However, these figures belie year-on-year sales declines of 1 per cent and 1.6 per cent for Australian and New Zealand operations over the November-December period.

A 10.5 per cent lift in Canadian sales to CAD48.99 million ($51.27 million) was the ultimate source of the positive result. 

For the first half of FY19 MHJ registered a sales decline of 4.2 per cent to $309.5 million, and the result would have been lower still if it weren't for stronger currencies in New Zealand and Canada. 

The group does have cause for optimism however, with e-commerce sales jumping 59.3 per cent to $8.1 million, while the share of branded collection sales has increased two percentage points to 20 per cent.

"This growth to end the quarter shows we have a strong platform on which to build and gives us confidence to continue to implement our strategy to become a globally relevant leader in the premium jewellery category," says Bracken.

"We have already seen good progress and over the past six months branded collections have grown to now represent 20 per cent of total product sales, while our e-commerce business continued its upward trajectory with sales growth of 59 per cent.

"While we are buoyed by the positive shift in sales momentum, we remain focused on strengthening the business in 2019 as we continue to evolve our strategy."

Six Michael Hill stores opened and three under-performing stores were closed during the period, giving a total of 309 Michael Hill stores trading at 31 December 2018.

The Company continued with its planned closure of the Emma & Roe brand, with four stores closing during the first quarter as planned. Two Emma & Roe stores and the Emma & Roe website continue to trade while store closure negotiations progress with landlords.

Last week the company announced Andrea Slingsby had been appointed as MHJ's new chief operating officer, effective 9 January.

"Andrea brings outstanding Australian and international experience to Michael Hill, having more than 25 years working in high-growth service sectors, including 14 years at Flight Centre where she held a number of senior executive roles, including President & CEO for North America," Bracken said in the announcement.

Slingsby has also held MD, CEO, Board, senior management and corporate advisory roles for a broad range of Australian private and public companies, and had been working on contract with MHJ since August 2018 on HR strategy and operational execution. Andrea is an Alumnus of the Harvard Business School.

"Her unique experience in people focused fast-growing companies, business model improvement and operational excellence is a major benefit for Michael Hill as we implement our strategy to become a globally relevant leader in the premium jewellery category,'' Bracken said.

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