In response to a significant drop in profits, renowned jewellery retailer Michael Hill has announced substantial changes to its managerial hierarchy and store operations. The company attributes the decision to challenging retail conditions and what it describes as ‘aggressive’ competitor behavior, as outlined in its latest trading update released on Friday.
The New Zealand-founded jewellery group foresees a profit ranging between $30-33 million for the first half of the 2023-24 financial year, a stark contrast to the $54.5 million recorded during the same period the previous year. Despite a 4.1 per cent increase in sales to $362.8 million across the group, the company faces financial headwinds.
In response to the challenging market conditions, Michael Hill has taken measures to streamline its operations, including the closure of six stores and a restructuring of senior management roles to reduce operating costs. While the company has not disclosed the exact number of job losses resulting from these changes, the move is seen as a response to margin pressures stemming from input costs and promotional activities.
Managing director Daniel Bracken acknowledged the difficulties faced in the first half of the financial year, citing both external factors and internal challenges. “Clearly margin was under pressure from both input costs and promotional activity, and inflationary forces saw elevated costs across many aspects of the business, which together impacted (earnings before interest and taxes) for the half,” said Bracken.
The jewellery group cited declining consumer demand, rising costs of gold and diamonds, and a difficult trading environment influenced by aggressive competitor behavior as contributing factors to their financial struggles.
Despite these challenges, Bracken expressed optimism about the company’s position in the broader jewellery sector, emphasizing the multi-brand strategy as a key strength. He stated, “Our multi-brand strategy puts us in a strong position to continue taking market share from our competitors as we expand the Bevilles network and elevate the Michael Hill brand.”
Founded in 1979, Michael Hill operates 272 stores across Australia, New Zealand, and Canada. The company also acquired the Australian jewellery chain Bevilles for $45 million in April, currently managing 26 Bevilles stores with four additional stores opened since the acquisition. Additionally, Michael Hill recently ventured into the high-end jewellery market with the online launch of its brand TenSevenSeven and a collaboration with Aussie rock band INXS for a unique jewellery collection inspired by the band’s iconic tracks.
