Growth in Canada helps lift Michael Hill Q1 sales

Michael Hill International chief executive Daniel Bracken. Photo / Supplied

Jeweller Michael Hill International reported a 9.7 per cent lift in September-quarter sales but said margin compression continues.

Sales increased to A$124 million ($132.5m) in the period, and were up 11.9 per cent when adjusted to reflect a new store opened in Canada and three closures in Australia, the Brisbane-based firm's biggest market.

Growth was strongest in Canada, where sales improved 16.4 per cent to C$27.2m ($32.3m) on a same-store basis, and in New Zealand, where they rose 10.1 per cent to $25.5m on a same-store basis.

Chief executive Daniel Bracken said the sales lift in those two countries was encouraging, but he noted that the retail environment remains "volatile and challenging."

Margin compression continues and while there are early signs of a slight recovery from the June quarter, margins have not yet recovered to historic levels, he said.

Michael Hill restructured its business last year, quitting the US and exiting its Emma & Roe sub-brand to focus on high-margin sales and make better use of other sales channels, such as online.

It had 304 stores operating at Sept. 29 – 165 in Australia, 87 in Canada and 52 in New Zealand.

Michael Hill shares last traded at 62 cents and have fallen about 3 per cent this year.

The firm's quarterly sales in Australia rose to A$68.3m, up 2.3 per cent from a year earlier and 6.8 per cent higher on a same-store basis. The firm shut three underperforming stores in the period.

Bracken said Australia remains "challenging" with discounting widespread as rivals try to maintain market share.

Sales growth in New Zealand reflected a "strong" lift in market share, while the 17.6 per cent lift in all-store sales in Canada was largely due to the firm's productivity initiative there, he said.

"The areas of focus included a restructure of the retail operations team, the introduction of new retail leadership roles, the new operating model, product launches, a shift in key metrics, and the trial of a new retail bonus scheme."

Website sales across the group rose 18.9 per cent from a year earlier, but were up 39.4 per cent once adjusted for the closure of Emma & Roe.

Sales of the firm's branded collection also continued to improve, on the back of better in-store execution and visual presentation and the introduction of new bridal collections during the June quarter, Bracken said.

They accounted for 37.9 per cent of total product sales in the quarter, up from the average 32.5 per cent across the June year.