Michael Hill Eyes US Exit
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Kiwi-based jewellers, Michael Hill is quitting the huge US market in the wake of months of declining sales. And it is also reviewing its 32 store strong Emma & Roe charm brand chain in Australia.
The dual-listed retailer on Wednesday said its US retail operations and Emma & Roe combined accounted for just 5% of revenue in the last financial year, but an earnings loss of about $12 million.
Earlier this month the New Zealand jewellery manufacturer reported a 10% decline in sales in the US for the six months to December 31, so on Wednesday, it was announced the company will exit the US.
Michael Hill International chief executive Phil Taylor said: "Our time in the highly competitive US jewellery market taught us a lot and helped to strengthen our core business including the development of our bridal collection strategy and the development of our Professional Care Plan.
"However, our US operations have not gained sufficient traction in recent years and the level of capital required to scale-up the business is not warranted under current trading conditions."
Despite the company’s problems with the US, Canada was performing well, with seven new stores opening, and sales up 4.8%, for the six months to December last year.
Its New Zealand business also saw sales increase by 3.4% during the same period, but its Australian store sales were flat for the half year.
The group has 347 stores around the world - 317 Michael Hill stores in Australia, New Zealand, Canada and the US, and 30 Emma & Roe stores in Australia and New Zealand.
Michael Hill says it expects to complete its review of Emma & Roe by the end of February and aims to reposition the viable stores to target what it refers to as the “demi-fine jewellery segment”.
The company expects to make non-cash write-downs of about $7 million against its Emma & Roe stores, which Mr Taylor said will complement the core Michael Hill brand.
He said the remainder of the financial year and the whole of 2018-19 will be a test and trial period for Emma & Roe, so they chain has around 18 months to prove itself.
"There is great potential in the demi-fine jewellery segment, where consumer desire for stylish affordable jewellery to accessorise their wardrobe is driving increased demand," Mr Taylor said.
“This approach will commence with a smaller, more concentrated store footprint to allow the company to be more agile in trialling the new concept, adapting its strategy and in managing risk."
Since launching in the US in 2008, Michael Hill’s US business has struggled to provide a return, despite "significant investment", Taylor said. The challenging retail environment in the US prevented the company from improving its financial position, therefore decided to pull out of the market, he added. The costs of the US withdrawal will be announced in due course.
Investors gave the announcement the thumbs up, sending the shares up 6.5% to $1.305 yesterday.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.