The chief executive of jewellery chain Michael Hill says the disruption felt by other retailers in the industry following the coronavirus outbreak had been minimal for the company.
Chief Daniel Bracken said Michael Hill, which operates stores throughout New Zealand, Australia and Canada, had been virtually unaffected by supply chainissues caused by Covid-19, though it had noticed a slight dip in foot traffic through certain stores popular with Chinese tourists.
China was a minor supplier of goods for the dual NZX/ASX-listed retailer, and it did not anticipate any long term challenges to arise from disruption to its supply chains, he said.
"We are relatively confident that we don't have any major supply chain issues to be concerned about. China only represents about six or seven per cent of our production, our largest sourcing country is India, followed by Australia, " Bracken told the Herald.
Michael Hill has a workshop in Brisbane, home to 45 jewellers, which make the majority of the company's solitaire diamond rings - a sizeable chunk of the retailer's revenue.
"That's proven useful in the last couple of weeks; even when there's been something special we've needed to get out of China, and haven't been able to get it, we've been able to divert back to our Brisbane workshop," Bracken said.
"When only less than 10 per cent of your product is coming out of China, we feel pretty well protected. The flip side to it is on the selling side and impact in the retail stores, like any major event, that can have an impact on our customers' desire to spend."
Bracken said some stores located in tourist destinations, such as Chadstone in Victoria, Australia, had seen "significant impacts" on foot traffic. "Even in centres like that we are managing to get good conversion rates (sales) so we're softening the impact of weaker traffic.
"At the moment we're okay, but we are watching it, like everyone is."
Michael Hill sources most of its diamonds and gold jewellery from India, largely from the city of Surat and the wider Gujarat region.
Bracken expressed concern for other retailers who would be significantly impacted by disruption following the outbreak: "I feel for all of my other colleagues in retail in other sectors because if you were in fashion, I suspect you would be 70, 80, 90 per cent China-sourced, and that would be a real worry."
Michael Hill reported a 19.6 per cent increase to its net profit after tax earnings in the six months to December 29.
The retailer banked earnings of $21.4 million in the first-half of the year, an increase on the $17.9m its posted in the same period a year earlier.
Shoppers walk past a Michael Hill store in Melbourne. Photo / Getty Images
Its underlying earnings before interest and tax increased by 6.9 per cent to $31.6m.
The company attributed the increase in its earnings to increased online sales through its website, and targeted reduction in costs. Its e-commerce sales increased by 44 per cent to almost $10m in the first-half of the year.
Its statutory earnings before interest and tax increased by 34 per cent to $35.3m, compared to $26.2m posted the same time a year earlier, while total revenue for the six months to December increased to $329.5m, up from $315.4m.
Bracken said the company was pleased with its half-year results and it reflected the transformation strategy that it had implemented over the past year.
"Really solid top line sales growth, slightly softer margins than we would have liked, but a really great result on the cost of doing business," he said.
"We have regained market share ... and we're now starting to shift our focus to a greater balance between sales and margins. We're confident that we've got all the right strategies and management team in place to continue to put out solid results."
