Michael Hill to fast-track payout after rebound

After COVID shutdowns, a strong Christmas allows the jeweller to flag an earnings rise and payment of a deferred dividend.

All Michael Hill’s 154 Australian stores and 49 New Zealand stores were back open and trading at the end of the December quarter. Picture: AAP

Jeweller Michael Hill is recovering from a horror year during which the pandemic forced it to shut more than 300 retail stores, flagging an earnings rise of up to 40 per cent and fast-tracking a skipped dividend payout.

In an announcement to the ASX, the retailer said it expected earnings before interest and tax in the first half of the 2021 financial year in the range of $41m-$45m when excluding wage subsidies received from the Australian, New Zealand and Canadian governments.

The forecast represents a 30 to 40 per cent increase on last year’s result of $31.6m. When accounting for wage subsidies the company projects earnings of between $56m and $60m.

Michael Hill CEO Daniel Bracken said the retail improvement was driven by a strong Christmas trading period, with same store sales up 5.6 per cent in the December quarter.

“Following a strong first five months, it was particularly pleasing to see all markets deliver positive same store sales growth for the all-important Christmas trading period,” he said.

“I am delighted that our strong trading performance across the half, coupled with our unwavering focus on costs, has in turn delivered material EBIT growth for the Group, in spite of challenging trading conditions worldwide.”

Also contributing to the result was continued growth in online sales, up 102 per cent for the half.

Digital sales now represent 5.8 per cent of total sales, compared to 2.8 per cent the year prior.

Due to the strong update the company said it was now in a position to pay last year’s deferred interim dividend of 1.5 cents per share on January 29. It had previously announced the payout would not be made until September 2021.

“Challenging conditions.” Michael Hill CEO Daniel Bracken. Picture: AAP

But the pandemic has had a lasting impact on the company: Over the last year 15 stores had been closed permanently, leaving the retailer with a global total of 289 physical locations.

And although all 154 Australian stores and 49 New Zealand stores were open and trading at the end of the December quarter, 40 of the 86 Canadian locations remained closed, although the impact was being offset by the use of contactless click and collect.

“All of our global markets were directly impacted by the pandemic in the first half, and I would like to make special mention of our Victorian and now our Canadian teams, who have weathered extended periods of disruption for both themselves and their families,” Mr Bracken said.

The strong trading period also means the company could resume repaying up to $25m in remediation for underpaid wages to former and current employees.

The company also announced a number of changes at executive level, with chief brand and strategy officer Vanessa Brennan stepping down alongside chief operating officer Andrea Slingsby.

Hair stylist Dry & Tea director Amy Sznicer will join the company as chief retail officer while McDonald’s Australian marketing chief Jo Feeney will take up the position of chief marketing officer.

“As we emerge from our critical trading period, with a stronger balance sheet, a leaner operating model and evolving strategies, I’m looking forward to welcoming two new leaders, who together with our existing executives, will continue to transform and inspire the business for growth,” Mr Bracken said.

Michael Hill closed at $0.73 cents a share, up 7.4 per cent.