Michael Hill benefits from a return of celebrations, strong branding in its jewellery range

Jewellery retailer Michael Hill International looks to have put the worst of Covid-19 behind it with strong sales growth through 2022 pushing into the new financial year.

Jewellery retailer Michael Hill International looks to have put the worst of Covid-19 behind it with strong sales growth through 2022 pushing into the new financial year, higher sales across all its regions and a new bridal campaign that is winning over couples ready to celebrate without pandemic restrictions.

The performance has enabled Michael Hill to ratchet up its final dividend and unveil a share buyback as it uses its balance sheet strength to deliver higher returns to shareholders.

The retailer, which has jewellery stores across Australia, New Zealand and Canada, said in the last financial year it managed to generate profit growth that outpaced sales growth, with gross margin expansion driven by strategic initiatives and strong loyalty penetration among its shoppers with around 80 per cent of sales from its 1.4 million loyalty scheme members.

The evolution of its product range, especially in the core diamonds category, has helped drive improved performance, with strategies such as an Australian artisanal workshop with emphasis on sustainability.

Michael Hill posted a 7 per cent lift in full-year sales to $595.2m as net profit increased 13.9 per cent to $46.7m.

The company raised its final dividend to 4c a share, up from 3c, payable on September 23 and also announced an on-market share buyback of up to 5 per cent of the issued capital.

Michael Hill has posted a strong sales growth in 2022. Picture: AAP

“I’m absolutely delighted by our outstanding results, delivering record sales, gross margin, and profit, especially considering the considerable disruptions we faced across Australia and New Zealand in the first half,” Michael Hill chief executive Daniel Bracken said.

“A highlight was our ability to grow profit faster than sales, with gross margin expansion driven by strategic initiatives across product, stores, digital and loyalty. These results demonstrate that we have successfully shifted the emphasis from transformation to growth, as we continue to elevate and modernise the Michael Hill brand.”

The retailer lifted sales across all its regions – Canada, Australia and New Zealand – to notch up 12 quarters of same store sales growth.

The company said it had same store sales growth of 8 per cent, with Canada up 11.3 per cent, New Zealand up 8.9 per cent and Australia up 4.2 per cent. Digital sales increased by 23 per cent to a record $42m, representing 7.1 per cent of total sales, up from 6.3 per cent last year

Gross margin increased by 200 basis points to 64.7 per cent for the group.

In the first eight weeks of fiscal 2023, the company said it had delivered strong early performance, with group sales up 13.4 per cent against the same period in 2021.

The group reported comparable earnings before interest and tax (EBIT) of $62.9m for the year ended June 26, an increase of $6.3m year on year, driven by a combination of strong sales growth and margin expansion.

During the year, the Michael Hill network suffered 10,020 lost store trading days (compared to 10,447 days in the 2021 financial year) due to a combination of government lockdowns and Covid affecting store teams.

Despite these disruptions to trading conditions, revenue grew by 7 per cent to $595.2m as the retailer continued to modernise the brand.

“Pleasingly, 2023 has started with both strong sales and gross margin performance,” Mr Bracken said.

“Our current bridal campaign has been extremely well received by customers and clearly demonstrates our commitment to brand elevation, our heritage, quality and craftsmanship. With the significant impacts from Covid behind us, we are still mindful of potential economic disruptions.”

Michael Hill shares closed up 3.9 per cent at $1.07.

Elsewhere, jewellery chain Lovisa posted a 59.3 per cent rise in full-year revenue to $458.7m as net profit gained 135.2 per cent to $58.38m. The earnings were ahead of market forecasts. Same store sales growth rose 19.9 per cent in 2022.

Originally published as Michael Hill benefits from a return of celebrations, strong branding in its jewellery range