Michael Hill pay moves to fight impact of coronavirus shutdown

Jeweller Michael Hill will pause repaying underpaid ex staff and cut board and executive pay as it fights to survive coronavirus.

Michael Hill Jewellers shut down 300 stores in late March. Picture: Jake Nowakowski

Jewellery retailer Michael Hill will pause repayments to underpaid former staff, slash board fees and cut executive pay as it battles the impact of coronavirus shutdowns.

It came as the jeweller issued a trading update which said it had headed into the virus crisis in a strong position with sales growth and lean debt, before having to shut its 300 stores in Australia and New Zealand in March.

Michael Hill is now preparing to reopen its stores when government and health authorities allowed and is confident it will be able to trade through the crisis, and beyond.

Meanwhile, though, it had decided to pause a remediation program to former employees who it discovered were underpaid wages, but they will accrue interest on the lost wages owed to them.

Last year Michael Hill discovered it had underpaid staff as much as $25 million. Current staff have been mostly repaid, but Michael Hill said repayments to former staff would be put on hold.

In other moves, Michael Hill is negotiating with landlords for a reasonable reduction in rent, has slashed its board fees by 50 per cent, eliminated cash short term bonuses for the second half and ordered all executives to take a 20 per cent pay cut.

The retailer also deferred its interim dividend to shareholders.

However the jeweller said heading into the coronavirus pandemic, its performance was strong.

It said positive sales growth was maintained throughout January and February, as the retailer delivered same store sales growth of 3.1 per cent for the first nine weeks of third quarter, against the prior year.

As at the end of February, year-to-date same store sales for the group were up 5.7 per cent against the prior year. Gross margin percentage improved compared to the prior year, with gross margin dollars lifting 2.2 per cent for the first nine weeks of the third quarter against prior year.

Michael Hill said its website sales were up by 49.1 per cent for the quarter.

In late March Michael Hill shut 300 stores, putting at risk the future of more than 2500 staff as it became the latest retailer to shut its doors in the wake of the health crisis.

Until then, its balance sheet had been strong.

“The company believes that it will have access to sufficient liquidity and reserves to trade through the crisis and beyond,” Michael Hill said.

“The company’s net debt as at March 29, 2020 is approximately half the available facility limit of $70m, which typically increases to $110m in September to support Christmas inventory purchasing.”

Michael Hill is negotiating with landlords over its rents.

“The company is actively engaging with landlords in all our markets to seek rent abatement for the period of close down.

“As it is expected that the business will be reopening its doors to a more subdued trading environment, we are also seeking ongoing rent abatement that is proportionate and fair in the circumstances for each lease.”