Michael Hill annual profit rises 67pc, boosted by Australia, NZ, Canada

Emma Hill, chairwoman of Michael Hill International.

A growing economy and rising house prices have helped jewellery retailer Michael Hill International add shine to its profits, say market experts.

The company boosted annual profit by two thirds as its Michael Hill chain grew steadily in its main markets of Australia and New Zealand and recorded stronger growth in Canada. However, it posted wider losses in its US business and fledgling Emma & Roe chain.

Profit rose to A$32.6 million in the 12 months ended June 30, from A$19.6m a year earlier, the Brisbane, Australia-based company said. Revenue increased 5.8 per cent to A$583m.

Jeremy Sullivan, investment advisor at Hamilton Hindin Greene, said the result reflected overall economic growth and rising house prices.

"People are feeling wealthier and have money to spend on that jet boat and diamond ring," Sullivan said.

Chris Wilkinson, managing director of First Retail Group, agreed the strong results reflected continued consumer confidence and strong property prices.

On the disappointing US result, Wilkinson said it was a highly challenging marketplace for retailers across all categories.

"Major retailers are continuing to jettison stores as consumers reign in spending and increasingly favour e-commerce," he said, adding that the US has a much stronger adoption of e-commerce compared to Australasia.

The jewellery retailer opened 26 stores during the year, of which 13 were Michael Hill and 13 Emma & Roe stores, and it closed seven, taking the total in the group to 332.

The company said the past year was solid, "achieved on the back of steady performances by our Australian and New Zealand businesses, and a strong performance by our Canadian business".

The company's Michael Hill stores in Australia lifted earnings before interest and tax (ebit) by 3.4 per cent to A$52.4m as revenue advanced 4 per cent to A$322m.

In New Zealand, the Michael Hill brand closed one store and opened another, leaving total store numbers unchanged at 52. Ebit lifted 2.6 per cent to $28m even as sales edged down 0.8 per cent to $122m, as the company improved its focus on variable expenses such as advertising, wages and credit.

Michael Hill's Canadian unit boosted ebit 38 per cent to C$12.6m while revenue jumped 18 per cent to C$112.7m, as it traded with an additional nine stores, taking the total to 76.

However, Michael Hill's US business deteriorated during the year, posting a wider ebit loss of US$3.8m from US$2.6m the year earlier, as revenue fell 12 per cent to US$12.5m.

Canadian head Brett Halliday now heads the US business as North American president and is reviewing the US business and making adjustments to the model as required, it said.

The company's Emma & Roe brand, which sells charm bracelets and accessories, increased revenue 62 per cent to A$15.1m as it opened 13 new stores, taking total store numbers to 29. However same-store sales slipped 2.1 per cent to A$7.2m and the business posted a wider ebit loss of A$6.9m from A$2.4m as expenses lifted 89 per cent to A$16.9m.

"We are continuing to review the Emma & Roe model based on customer responses and insights, with a view to making adjustments to the brand offering during 2017-18," the company said.

Forsyth Barr broker Lyn Howe said Michael Hill's core store portfolio and brand was in good shape and still offered attractive growth.

"However, new initiatives are constraining reported growth rates and more work is required to build confidence in the model," Howe said.

The company will pay a final dividend of A2.5c per share on September 29, taking the total annual dividend to A5c.

Additional reporting BusinessDesk and Otago Daily Times