Michael Hill International is finding it harder to shift away from discount pricing than it anticipated, posting an 8.8 percent decline in first-quarter sales. 

The jewellery chain’s sales from continuing operations fell to A$112.12 million in the three months ended Sept. 30 from A$122.9 million a year earlier. Same-store sales posted a sharper decline of 11 percent. 

The retailer restructured its business this year, quitting the US and exiting its Emma & Roe sub-brand to focus on high-margin sales and improving its use of other sales channels, such as online. Gross margin improved in the quarter to 64.6 percent from 63.1 percent. Chief executive Phil Taylor said that strategy is still the right one, however, the move away from discounting needed more spending on marketing and advertising. 

“While the transition is proving more challenging than expected we remain committed to the strategy and have taken many learnings from the first quarter which we are confident will drive performance in the critical December quarter,” he said in a statement. 

Taylor is stepping down from the top job effective from today for health reasons. He’ll stay on for six months to help smooth the transition, with Daniel Bracken stepping up to the role. Bracken was the head of Specialty Fashion Group. 

Michael Hill opened three stores and closed three stores in the quarter, leaving it with 306 as at Sept. 30. The retailer has 169 stores in Australia and plans to open another two ahead of Christmas. It has 53 stores in New Zealand and 84 in Canada. 

Australian sales dropped 11 percent to A$65.1 million in the quarter, while New Zealand sales fell 7.4 percent to NZ$$23.9 million and Canadian sales declined 7.3 percent to C$24 million. 

Four Emma & Roe stores were closed, leaving two left as the retailer winds up the unit. Heavy discounting increased trading activity, with Emma & Roe sales more than doubling to A$2.4 million. 

Michael Hill shares last traded at 84 cents and have dropped 26 percent so far this year. 

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