Consumer confidence and online boom help Michael Hill sparkle

Jewellery retailer Michael Hill International is expecting its first-half earnings to be strongly up on last year.

Michael Hill chief executive Daniel Bracken: ‘The two weeks of trade leading up to Christmas are critical to the company’s overall performance.’ Picture: AAP

Jewellery retailer Michael Hill International is racing towards its crucial Christmas trading period with the tailwinds of strong consumer confidence, willingness to spend on discretionary items and a booming online business, and is expecting its first-half earnings to be strongly up on last year.

Shares in the group surged on the prediction, closing up 18.5 per cent at 64c each on Thursday.

In a trading update to the market, Michael Hill did, however, moderate the bullish outlook with a reminder to investors that the COVID-19 pandemic continued to have an impact on its business, with 14 of its Canadian stores closed, as well as the wider retail sector with lower foot traffic in shopping centres.

Michael Hill said despite managing the ongoing challenges of a global pandemic, the company continued to deliver growth in both same-store sales and gross margin for the October-November period.

In its interim trading update for the 22 weeks to November 29, it said it had maintained strong same-store sales growth in all markets and channels. Same-store sales for the period were up 7.9 per cent against last year.

Same-store sales for October-November were up 8.5 per cent.

There had also been a sustained margin improvement with margin growth of around 200 basis points for the 22 week period against last year, underpinning an increase in gross profit.

All markets achieved a significant lift in sales, resulting in online sales increasing by 110 per cent for the 22 weeks.

“While this trading announcement is focused on the positive start to the first 22 weeks of fiscal 2021, as we enter the final critical weeks of Christmas trade, concerns remain around further COVID-19 outbreaks, lower instore foot traffic, and their potential impact on first half earnings,” Michael Hill told the ASX.

“In accordance with local provincial requirements, 14 Canadian stores are temporarily closed, and could remain closed through December, due to COVID-19 lockdowns. The company continues to monitor the potential impact on trading conditions in Canada.”

Michael Hill expects to deliver an EBIT result for the first half materially exceeding the prior year first-half result of $31.6m, before taking into account the favourable impact of wage subsidies and lease accounting provisions.

“Across all channels and segments, the company has delivered strong results for October and November, continuing on the solid growth in sales and margin from the first quarter,” said chief executive Daniel Bracken.

“In addition to this impressive top line performance, the company continues its unwavering focus on costs, and has worked diligently to deliver strong improvements in its cash and balance sheet position. These results reinforce our commitment to the strategic initiatives across retail fundamentals, omni-channel, loyalty and product evolution.

“As we enter the all-important month of December, I’m pleased that the company is well-placed with a strong product offering, our best ever Christmas campaign, and an energised retail team across all geographies.

“The two weeks of trade leading up to Christmas are critical to the company’s overall performance and we are keeping a close eye on the evolving restrictions in Canada. The health and safety of our team members and customers remains a priority for the company as we continue to provide team member support.”