Michael Hill's Australia market improves, profit gains

The retailer grew revenue and earnings in Australia, its largest unit, after posting weaker earnings last year. Photo / NZME

Michael Hill International, the listed jewellery retailer, increased first-half profit 5.1 per cent as it improved its performance in its key Australian market and boosted margins in New Zealand and Canada.

Profit rose to A$24.9 million, or 6.48 cents per share, in the six months ended December 31, from A$23.7 million, or 6.15 cents, in the year earlier period, the Brisbane-based company said in a statement. Revenue increased 9.7 per cent to A$310.8 million.

The retailer grew revenue and earnings in Australia, its largest unit, after posting weaker earnings last year. Its New Zealand and Canadian units boosted earnings and profit margins, while its US unit was impacted by store changes.

"It was particularly pleasing to see both revenue and (earnings before interest and tax) growth come from our largest market, Australia, given the continuing lack in consumer confidence in many parts of the country," said chief executive Mike Parsell. "The Australian, New Zealand and Canadian segments performed well during the period and are expected to continue to show strength through the second half."

The company's 166 Australian stores increased ebit 2.9 per cent to A$32.4 million as revenue rose 4.2 per cent to A$175.6 million. The profit margin slipped to 18.5 per cent from 18.7 per cent in the year earlier period. Same store sales grew 3.4 per cent following a 1.9 per cent decline in the year earlier period.

Its 52 New Zealand stores grew ebit 10 percent to $15.3 million as revenue rose 6.7 percent to $67.5 million, aided by a strong Auckland economy. The profit margin improved to 22.7 per cent from 22 per cent.

Michael Hill's Canadian unit improved ebit 47 per cent to C$7.4 million as revenue jumped 19 per cent to C$53.3 million. Store numbers increased to 65 from 59 and the profit margin widened to 13.9 per cent from 11.3 per cent.

"The Canadian segment continues to grow and improve as it reaches critical mass in the larger provinces in Canada," the jeweller said.

In the US, the first half was impacted by increased marketing spending, the three-month closure of Woodfield Mall in Chicago, and by the costs associated with opening a new store at Roosevelt Fields in New York, the company said.

The operating loss in the US widened to US$1.5 million from US$600,000 in the year earlier period, although revenue increased 25 per cent to US$7.4 million. The number of stores increased by two to 10.

"We remain confident of further improving our US model over the coming half year and are committed to continuing testing of our model in this lucrative market," the retailer said.

The company said it will assess its Emma & Roe chain at the end of the financial year and decide whether to proceed with a full expansion. The brand, which sells charm bracelets and accessories, was launched in April 2014 and has 11 stores.

Michael Hill will pay a 2.5 cent dividend on April 1, unchanged from the year earlier period.

Its shares last traded at 95 cents and have slid 4 per cent so far this year.

The stock is rated a 'buy' according to three analyst recommendations compiled by Reuters.