Jewellery retailer Michael Hill said it has started FY21 on a positive note as it reaped the benefits of its continued enhancements on its e-commerce site and omnichannel experience, and the launch of its new brand Medley.
Daniel Bracken, Michael Hill International CEO, said that while they are continuing to navigate the impacts of the global pandemic and the ongoing potential of store closures, they have also identified a number of growth and margin opportunities to strengthen their business across product, digital and a true omnichannel offering.
According to the retailer, it wants to build on the successes of FY20 like the launch of its virtual try-on platform and virtual selling to further enhance its digital offerings like loyalty and new sales platforms and customer communication channels.
The company added that its recent investment in its new ERP platform will help it navigate on multiple digital and physical initiatives to meet the demands of a modern-day customer, including “click and collect/reserve”, “ship from store”, as well as “drop ship” and marketplace opportunities.
This month, the company launched its pureplay digital brand Medley, which features on-trend jewellery offering.
“This offers us a real opportunity to expand into the high margin demi-fine category, attracting a new customer demographic in an agile and capital light manner,” Bracken said.
“Pleasingly, gross margin improvement has continued as our investments in strategic initiatives gather momentum.”
FY20 results
In the the 52-week period ending June 28, Michael Hill posted a statutory net profit after tax of $3.1 million down from FY19’s $16.5 million, noting new AASB 16 Leases applied for FY20 only.
Earnings before interest and tax (EBIT) was $14.1 million compared to FY19’s $21.1 million and underlying trading EBIT of $25.7 million down from FY19’s $34.6 million.
The company posted group operating revenues of $492.1 million down from FY19’s $569.5 million, which Michael Hill noted was largely attributable to Covid-19-related store closures.
The company posted a 2.7 per cent rise in group adjusted same store sales of $469.3 million compared to FY19’s $457.1 million.
Digital sales increased by 54.7 per cent to a record $24.7 million from FY19’s $16.0 million, representing 5.0 per cent of total sales compared to the 2.8 per cent of FY19.
During the period, one new store opened and seventeen underperforming stores were closed, giving a network total of 290 stores across all markets, a decrease from the 306 stores in FY19. The store that closed was in Canada.
In Australia, adjusted same store sales marginally improved by 0.1 per cent, and all stores revenue declined by 15.0 per cent to $266.6 million for the year. Gross margin for the year was 60.4 per cent, largely due to FX impacts on cost of goods. While the majority of the revenue decline is attributable to the Covid-19 temporary store closure period, a portion is also due to the closure of thirteen underperforming stores during the year.
In New Zealand, adjusted same store sales increased by 2.4 per cent to $103.9 million and all store revenue declined by 11.1 per cent to $106.7 million for the year. Gross margin for the year was 59.6 per cent. The decline in revenue was attributable to the Covid-19 temporary store closure period.
In Canada, adjusted same store sales increased by 2.3 per cent to $102.8 million and all store revenue declined by 16.8 per cent to $110.8 million for the year.
A year of two halves
“As I reflect on FY20, it was certainly a year of two halves,” Bracken said. “Following on from the positive sales momentum achieved across FY19, the business delivered consecutive quarters of sales growth in all markets to finish the first half with +6.3 per cent comp sales.”
“As we entered the second half, we started to see the benefits of our strategies gaining traction as the business shifted its focus to a balance of both sales and margin.”
Bracken said that prior to the Covid-19 store closures at the end of March, the business was successfully delivering both sales and margin growth, and was tracking to achieve increased year-on-year EBIT.
“While the Covid-19 closures had a severe impact on headline sales and profit, I was particularly proud of the determination, resilience, and agility of our team across the business through the shutdown and temporary closure periods,” he said.
“The reopening of our store network saw pleasing sales recovery despite lower foot traffic, and a return to strong margin performance against prior year. This reflected the importance of the strategic progress we have made over the last 12 months and the dedication of our team members and loyal customers.”
