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Summary
- Michael Hill recorded strong sales for the company during FY21H1, with total same store revenue increasing by 6.3%.
- Digital sales and product expansion were the strategic initiatives that helped the company hit higher revenues.
- The share prices for ASX:MHJ saw a single day uptick of 8.8% post the announcement.
Michael Hill International Limited (ASX:MHJ, NZX:MHJ) released its second quarter business update for the period ending 27 December 2020. The company delivered strong performance during the period resulting in material profit growth.
The company also rolled out a release announcing that payment of outstanding dividends would be done on 29 January 2021. The interim dividend for FY20 had been delayed twice; however, this time the company has been able to finish dividend payment in time, thanks to the strong current performance.
The announcement led to a single day uptick of 7.35% for the company’s share price. ASX:MHJ is currently trading at AUD 0.73 per share, showing its best performance in the last 6 months. On NZX, the company is trading at NZD 0.79, exhibiting an uptick of 8.22%.
Strong Financial Standing
Having reported significant EBIT growth, Michael Hill projects its FY21H1 Group EBIT to reach a value of $56 million to $60 million. The figure for the corresponding EBIT excluding the gross wage subsidies is projected to be in the range of $41 million to $45 million, a 30-40% growth over FY20H1.
The jewellery retailer recorded an uptick of 6.3% in sales revenue for the first half of FY21, compared to the first half of FY20. An increase of 5.6% was also recorded in the second quarter of FY21 over the previous corresponding period. The period was also marked with strong online sales boosting revenue for the company. Online sales went up 102%, leading to digital sales accounting for 5.8% of total sales for the half. This is a significant improvement over the first half of FY20, where digital sales formed only 2.8% of the company’s total sales.
For the second quarter of FY21 ending 27 December 2020, the retail revenue across same stores saw an uptick of 5.6% compared to the same period last year. The total revenue for the second quarter of FY21 is recorded at $195.3 million.
Variations in Global Store Network
The store network maintained across the three jurisdictions of Australia, Canada and New Zealand saw variations depending on the lockdown restrictions. Australia benefitted from the easing of restrictions as 28 Melbourne stores reopened in late October. Despite a minor challenge of 8 South Australian and 1 NSW store being closed temporarily, the company resumed business in all its 154 stores across Australia by the end of Q2FY21.
However, the same was not true for Canada, which saw 21 stores progressively closing through November and December. Further, 25 stores were closed from the Boxing Day, leaving only 40 stores operational in the jurisdiction by the end of Q2FY21. The stores in New Zealand fared well, as neither of the 40 stores in the jurisdiction saw any temporary closures.
Digital platforms enabled Michael Hill to resume business through these shutdowns.
Structural and Strategic Changes Underpinning the Growth
The CEO of Michael International, Daniel Bracken, stated that all areas of business have been important in bringing out positive results for the company. The Christmas sales led these strong figures and helped the company achieve immense growth over the quarter as well as in the first half of FY21.
CEO Bracken also pointed out that the company’s performance had been backed by constant focus on cost and the strategic initiatives taken by the company. Initiatives like digital transformation and product mix were crucial to the company’s growth during the pandemic time.
The company also hired Amy Sznicer as its Chief Retail Officer and Jo Feeney as its Chief Marketing Officer.
