Some Michael Hill stores will not reopen

Jeweller Michael Hill will reopen the doors of almost half its network from Saturday, but some stores are to close for good.

While many Michael Hill stores will soon reopen, some will stay shut. Picture: Jake Nowakowski

Jewellery retailer Michael Hill International will begin opening the doors of almost half its network of 300 stores from this Saturday following a successful trial, but some outlets will not reopen.

The permanent closure of some stores represents 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, which has 300 stores in Australia, New Zealand and Canada, reported strong online sales in recent weeks, with digital sales “above previous record Christmas 2019 levels”.

The online sales signalled a “notable shift” in consumer behaviour in jewellery category.

However the company needed to reduce its cost base to cope with the economic uncertainty.

It also announced that chief executive Daniel Bracken was recovering from surgery and would reduce his workload for the next few weeks.

Michael Hill was one of the early retailers to close its stores in March as the coronavirus pandemic took hold, standing down 2500 staff.

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It told the ASX on Friday there would be a gradual reopening of stores in all markets, with safety protocols in place.

After an initial trial across selected stores, nearly 100 Australian stores and 25 New Zealand outlets will be operating from Saturday May 16, with the balance of Australian and New Zealand stores to progressively open over the coming month.

Canadian stores will start reopening from late May.

But Michael Hill said it expects difficult trading conditions in the weeks and months ahead, forcing it to shrink its store network. Some stores would not reopen.

“The company still anticipates an ongoing impact on revenue and profitability due to the uncertainty of the economic landscape,” the company said.

“Accordingly, we have been negotiating with all our landlords to reach reasonable commercial arrangements that reflect the reality of the consumer marketplace and trading conditions.

“In addition, the company has decided that it will not reopen some underperforming stores across all three segments - to date, five in Australia, three in New Zealand and one in Canada.

“Further store closures are likely across all markets, based on store performance and the outcome of landlord negotiations.”

Recovering from surgery: Michael Hill CEO Daniel Bracken. Picture: AAP

Michael Hill said Australia was witnessing pent-up consumer demand with trading results delivering increased sales compared to the prior year heading into Mother’s Day celebrations.

The last three weeks had seen a big rise in digital sales.

“Over the seven week period of store closures, we took the opportunity to deliver a number of key digital initiatives and we have developed new strategies to grow our digital business and meet our evolving customers’ needs.

“We launched several alternative revenue opportunities and also enhanced the digital user experience.”

These online experiences included virtual appointments, an online video hub, interactive shoppable catalogues and more activity on social media platforms including Instagram and WeChat.

“The surge in our digital sales signals a notable shift in consumer behaviour in the jewellery category,’’ Mr Bracken said. “We have been quick to respond and harness this opportunity, with the implementation of a number of digital initiatives to continue to attract new customers and maintain the momentum.

He said reopened Michael Hill outlets would provide a “safe store environment” in the continuing health crisis.