The jewellery business Michael Hill International reported a 101.4 per cent fall in net profit after tax (NPAT) for FY24, hitting negative $479,000.
The group’s operating profit (EBIT) was also impacted, dropping 75.8 per cent to positive $14.2 million, with the business citing inflationary cost pressures and an impacted gross margin for the earnings performance.
Group gross margin fell 360 basis points to 60.6 per cent in line with previous guidance, impacted by higher input costs for both gold and mined diamonds and increased promotional activity in response to more aggressive retail trading conditions.
“In addition, during the last two months of FY24, there was a deliberate focus on promoting inventory to make way for higher margin product in FY25,” the group reported.
As for inflationary costs, Michael Hill cited store labour and occupancy as the most significant pressures.
“With this in mind, throughout the year management took action to reduce discretionary spend, corporate roles and overheads, reflecting the underperformance of the business, with many of these savings annualising through FY25.”
Michael Hill reported in February this year that these measures, including the axing of some leadership roles, drove annualised savings between $3 million and $4 million.
Alongside the core Michael Hill business, the group also owns and operates low-price retailer Bevilles, pureplay jeweller Medley, and its new luxury business TenSevenSeven.
The dive in earnings across the business came despite a group-wide revenue lift of 2.4 per cent to $644.9 million.
This overall revenue lift was driven by an 8.5 per cent growth in Australia, Michael Hill’s largest market, to $359.1 million, which includes Bevilles.
The growth was offset by a 13.3 per cent sales drop in New Zealand, mostly impacted by a surge in retail crime across the country which pushed the jewellery business to spend around $5 million to implement new security measures.
Meanwhile, sales growth in Canada had decreased on a statutory basis by 1.1 per cent to CA$157.1 million (~A$172 million).
Managing director and CEO Daniel Bracken said Michael Hill International's FY24 earnings were disappointing, with challenging economic conditions and inflationary pressures impacting consumers across all its markets - Australia, New Zealand and Canada.
Despite the challenging market, Bracken said the business continued to execute its strategic shifts, including the brand refresh of Michael Hill and the retail expansion of Bevilles to now 36 stores.
Bevilles’ expansion included its initial entrance into Queensland, with five new stores and two conversion stores, along with three new stores in existing territories.
“Additionally, in the year, the business further demonstrated its commitment to sustainability with the launch of its re:new ecosystem, including gold recycling and jewellery repairs, and the creation of the Michael Hill Foundation,” Bracken said.
The business’ newly launched luxury business TenSevenSeven has been placed on the back burner, with the company reporting it will resume scaling the business when trading improves. This will include leveraging group data for customer acquisition and the opening of flagship showrooms.
Looking into FY25, group same-store sales were up 2.7 per cent for the first eight weeks of the new financial year, with both Australia and Canada up 5 per cent and 4 per cent respectively. New Zealand’s same-store sales were down 6.2 per cent.
For the first eight weeks of FY25, Group same store sales were up 2.7% on prior year, with same store sales for the:
Total sales for the group were up 3.2 per cent for the first eight weeks of FY25.
“The first eight weeks sales performance has been encouraging, with positive performances from both Australia and Canada, and some improvement in New Zealand where conditions still remain more challenging,” Bracken said.
“As we plan for the year ahead, initiatives are underway to drive sales and productivity, enhance margin, optimise inventory and prioritise operational expenditure across the group.”