Michael Hill rides online sales wave

Jeweller Michael Hill says it’s making a ‘robust’ return from the coronavirus crisis, posting a 193pc jump in digital sales.

Michael Hill had to shut many stores during the coronavirus pandemic. Picture: Jake Nowakowski

Jewellery retailer Michael Hill is riding a wave of booming online trade triggered by the closures of its stores due to the coronavirus pandemic, with digital sales for the fourth quarter up 193 per cent.

In a trading update, the jewellery chain said it had made a “robust” return to trade in the quarter as its stores began a staggered reopening after closures and staff lay-offs forced by the COVID-19 crisis.

Michael Hill said like-for-like store sales were down 4.1 per cent for the period against the same time last year.

But other retailers, Michael Hill has seen a massive leap in online sales as consumers stay home and shun crowded shopping centres.

The jeweller said its flagship Australian arm had posted an 8.1 per cent fall in sales for the quarter. New Zealand sales were down 10.9 per cent and sales in Canada up 38.1 per cent as store closures, reopenings and online traffic produced a volatile revenue performance.

For fiscal 2020, total like-for-like revenue was expected to be $469.3 million, up 2.7 per cent, while total sales were expected to hit $485.67m, down 13.7 per cent.

However, the fresh coronavirus outbreak and spike in Victoria has pushed Michael Hill to temporarily close seven stores.

The retailer said in the quarter, a number of digital initiatives had helped lift online sales. For the year, digital channels represented 4.6 per cent of total sales against 2.8 per cent in 2019.

Michael Hill also said there had been margin improvement, with fourth quarter margins up 200 basis points against the prior year, delivering flat profit dollars for the quarter on an adjusted same-store sales basis.

Same-store sales for the year were up by 2.7 per cent against the prior year. For the nine month period to the third quarter, adjusted same-store sales were up 3.6 per cent, against the prior year.

Michael Hill confirmed its commitment to closing down unprofitable or poorly performing stores to focus on its online business. It closed 11 underperforming stores during the quarter - seven in Australia, three in New Zealand and one in Canada. It now has a total of 290 stores across all markets.

In May, Michael Hill warned that some of its stores would not reopen, representing what could be an emerging trend in the retail sector, as companies cut costs to handle the economic downturn caused by COVID-19.

Michael Hill is also taking steps to transform to a leaner business. It said all discretionary operating spend was paused, with planned capital expenditure cancelled or deferred other than the completion of a cloud-enabled ERP platform and one flagship refurbishment.

It has stood down over 100 support office team members.

Michael Hill chief executive Daniel Bracken said the retailer has emerged from the pause in store trading as a leaner, stronger and more focused business.

“I’m very proud of the professionalism demonstrated by all our people over the last four months as we navigated the complexity of a global pandemic - whether it be the health and safety of our team and customers, new instore protocols, the unwavering focus on costs or our resilient and robust return to trade.

“The reopening of our store network has seen very pleasing sales and margin performance despite lower foot traffic. This reflects the dedication of our team members, the continued engagement of our loyal customers and the importance of the strategic progress we have made over the last 12 months.”

He said while his aim throughout had been to preserve as many jobs as possible, some jobs would go as the economic outlook remains uncertain.

“There is no doubt that economic uncertainty will continue, given future government stimulus packages in all markets remain unclear, and ongoing volatility in consumer confidence is likely. As recent circumstances in Victoria have demonstrated, further COVID-19 outbreaks pose additional risks. With these risks in mind, Michael Hill has moved swiftly in addressing our operating model and associated cost base.

“Having said this, the company has experienced a solid start to the 2021 financial year, with all markets and channels ahead of prior year.”