Michael Hill exits US, reconsiders Emma & Roe

Emma&RoeSMALLJewellery retailer Michael Hill (MHJ) is exiting its US operations and reconsidering the future of subsidiary brand Emma & Roe, following a strategic review.

The complete exit of its loss-making retail operations in the US comes after continued poor performance saw same-store sales drop a further 10 per cent in the retailer’s most recent trading update.

“These actions strengthen the foundations of Michael Hill International as we aim to improve the operating performance of our group assets by refocusing capital and resources to those parts of the business delivering the highest returns and potential for growth,” said Phil Taylor, chief executive officer, Michael Hill.

“We see these actions, along with an increased investment on improving the group’s digital capabilities and e-commerce platform, as being the key pillars to driving ongoing sustainable business growth and attracting customers in new and engaging ways.”

MHJ is also mulling over a new brand proposition for the Emma & Roe brand, aimed at “capitalising on the emerging demi-fine jewellery segment and rising popularity of fine fashion”.

The review includes an increased strategic emphasis on omnichannel and a material reduction in store numbers as part of a ‘test and trial’ period for the repositioned brand. As a result, MHJ will assess the viability of its 30 Emma & Roe stores, in conjunction with landlord negotiations, to determine the final store portfolio to trial the repositioned brand.

The Michael Hill brand will continue to have over 300 stores globally once the US store closures are finalised. This currently includes 172 Michael Hill stores in Australia, 53 in New Zealand and 83 in Canada.

In 2016-17, the US retail operations and Emma & Roe business combined, accounted for 5 per cent of total annual group revenues, while contributing an EBIT loss of approximately A$12 million.

US and Emma & Roe stores comprised 11 per cent of the Group’s total retail store network at December 31, 2017.

The company continues to see significant long-term value in its Michael Hill businesses in Australia, New Zealand and Canada, which continue to perform strongly. In 1H2018, Michael Hill stores in these regions accounted for 95 per cent of total Group revenues and recorded same store and total store revenue growth of 1 per cent and 5 per cent.

“There is great potential in the demi-fine jewellery segment, where consumer desire for stylish affordable jewellery to accessorise their wardrobe is driving increased demand,” said Taylor.

“We also see this as being complementary to our Michael Hill brand as our customers are combining fine jewellery with lower cost demi-fine jewellery and associated accessories.

“This approach will commence with a smaller, more concentrated store footprint to allow the company to be more agile in trialling the new concept, adapting its strategy and in managing risk.”

“While disappointed with the past results of Emma & Roe, it’s important that the company maintains its vibrant culture of innovation in order to expand its reach and engage with new and emerging customer segments.”

Since launching in the US in 2008, the Michael Hill US business has struggled to provide a return for the group despite significant investment into developing a viable business model.

“Our time in the highly competitive US jewellery market taught us a lot and helped to strengthen our core business including the development of our bridal collection strategy and the development of our professional care plan,” said Taylor.

“However, our US operations have not gained sufficient traction in recent years and the level of capital required to scale-up the business is not warranted under current trading conditions.”

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