Michael Hill International has reported a substantial decline in its financial performance for FY24 across its global footprint.
The company experienced a 101.4 per cent drop in net profit after tax (NPAT), resulting in a loss of $479,000. This significant downturn was accompanied by a 75.8 percent decrease in operating profit (EBIT), which stood at $14.2 million. These results come in the wake of challenging economic conditions, with inflationary pressures and rising input costs cited as the primary factors impacting the group’s profitability.
Revenue Growth Offset by Market Challenges
Despite these setbacks, the group reported a 2.4 per cent increase in overall revenue, reaching $644.9 million. This growth was primarily driven by the Australian market, where sales rose by 8.5 per cent to $359.1 million. However, the revenue gains were partially offset by a 13.3 per cent decline in New Zealand, attributed to a surge in retail crime, which forced the company to invest approximately $5 million in enhanced security measures. In Canada, sales fell by 1.1 per cent to CA$157.1 million (approximately AUD 172 million), reflecting the broader economic challenges faced by the business.
Impact of Inflationary Pressures
The decline in Michael Hill’s profitability is closely linked to inflationary cost pressures, particularly in store labour and occupancy costs. Additionally, the gross margin fell by 360 basis points to 60.6 per cent, influenced by higher costs for gold and mined diamonds, as well as increased promotional activity aimed at navigating aggressive retail conditions. The company also focused on promoting existing inventory during the final months of FY24 to make room for higher-margin products in FY25.
Strategic Shifts and Future Outlook
In response to these challenges, Michael Hill undertook several cost-cutting measures, including reducing discretionary spending and corporate roles, which are expected to yield savings of between $3 million and $4 million annually through FY25. Despite the difficulties, the company continued to execute strategic initiatives, including a brand refresh for Michael Hill and the expansion of its Bevilles chain, which now operates 36 stores.
The company’s new luxury venture, TenSevenSeven, has been temporarily scaled back, with plans to resume its development as trading conditions allow.
Looking ahead to FY25, Michael Hill reported a 3.2 per cent increase in total sales for the first eight weeks of the new financial year, with same-store sales up 2.7 per cent. CEO Daniel Bracken expressed cautious optimism, noting positive sales performances in Australia and Canada, although New Zealand continues to face more challenging conditions. Bracken noted that the company is working to drive sales, improve margins, optimise inventory, and manage operational costs across the group.
