Michael Hill flags better first-half earnings

Shoppers ignored Omicron concerns to tick off shopping lists in November and December, delivering a shinier outlook for the retail jewellery group Michael Hill.

Michael Hill CEO Daniel Bracken has overseen steady recovery since the first quarter update in October.

Shares in retail jewellery group Michael Hill surged more than 20 per cent after it lifted first-half earnings guidance, telling investors the outlook was shiner after a strong Christmas trading period.

Michael Hill expects earnings for the six months to December 26 to be “well above” the previous comparable period after uncertain trading conditions due to new pandemic variants failed to dent shoppers’ enthusiasm.

“Having successfully navigated extended periods of closures from July to November across Australia and New Zealand, the company was delighted to have all stores open globally for the critical Christmas trading period,” the group led by chief executive Daniel Bracken said on Wednesday.

“Even with the uncertain trading conditions stemming from the Delta and more recent Omicron Covid variant, Michael Hill delivered both sales growth and sustained margin expansion throughout November and December.”

Michael Hill shares spiked as much as 21.6 per cent, or 24.5c on the news to close at $1.38 — a level not seen since June 2017.

The rise gave it a market capitalisation of $535.8m, more than five times its value at the low point of the coronavirus induced slump in June last year.

The retailer expects the strong performance will see earnings before interest and taxes come in higher than the $44.6m in the previous corresponding period in the 2021 financial year.

The latest update follows its first quarter report in October, which showed trading for the 13-weeks to September 26 period had delivered double digit same stores sales growth.

Demand for premium jewellery, fed by consumers celebrating milestone events, including weddings, has kept up through the pandemic.

US warehouse supermarket chain Costco has seen its jewellery range, including diamond earrings priced as much as $15,000 selling strongly across its Australian stores.

Mr Bracken said earlier this year that millennial couples they are increasingly turning to laboratory made diamonds for their engagement rings as an socially responsible alternative to diamonds mined of the ground.

“Laboratory grown diamonds are definitely gaining momentum and as the customer understands it, the more millennial, Gen Z customer, it has attributes that differ from mined diamonds,’’ Mr Bracken said. “The whole path of provenance and the sustainability angle are important things and this is about us providing choice.”

Michael Hill has also previously flagged expectations that bridal business sales delayed by the pandemic would ultimately happen, driving shoppers into its stores.

The latest update from Michael Hill comes amid economist concerns about sliding business confidence as the Omicron variant spreads, despite consumer spending holding up.

The business will provide a full second quarter trading update on January 14 with the first-half results due on February 23.

The Brisbane-based group has 285 stores in Australia, NZ and Canada.